Debt is debt no matter who you owe from cash advances gone bad to a pile of credit cards maxed out. Debt is money that you borrowed and promised to return with a fee for the service. This fee is most often determined by an interest rate. This rate is charged against the amount owed and is added to the balance of the account. Once a debtor has defaulted on payments, the risk of the debt collectors rises.
There are three types of debt collectors.
- Debt companies who purchase debt from creditors and work at retrieving money for themselves.
- Some debt companies are hired by collectors and get paid a certain price per dollar of money collected.
- Debt collection attorneys will collect debt which has been processed through litigation.
Once debt lands in the hands of the collectors, there are negative reports sent to credit bureaus. These reports are in addition to whatever was already reported from the creditors themselves. Late payments, missed payments and high balances are all logged against a borrower as negative reports to all three of the major credit card companies.
Online Cash Advances do not report to the credit bureaus.
Short-term loans have no connection to credit reports. There is no credit bureau check, the loan is not reported and as long as you keep your account in good standing, the debt stays out of the bureau’s eyes. Once you default on your debt and the company sells the debt to a collections agency, your luck changes. These companies will report the amount of defaulted debt to the credit bureaus. Many short-term cash advance lenders or online payday loan companies will have an in-house collections department to continue to attempt collection for a short period of time after the loan is defaulted upon. It is always in the best interest of a borrower to work with the lender or creditor to keep debt out of a collector’s hands.
It is always in the best interest of your credit to communicate problems before they happen. Many people use cash advances to help out while waiting for the next paycheck, but there are some who get denied this loan. There are also others who are accepted, but for the safety of their finances should not take out a short-term loan. When fast solutions are not available or useful, give a call to a creditor and let them know you are running into a pinch with costs. You may be able to work out a plan or at least some of the extra costs of late fees. A creditor is much more willing to work with a person who is upfront and makes every effort to pay the debt off.
If you do end up on the receiving end of a collector’s phone call, know that you are protected from abusive or harassing collection practices.
- Make sure the collections company identifies themselves clearly and it is done upfront.
- Is the collector making attempts to collect debt based on accurate data? Do you really owe the money?
- Report any unprofessional tactics to collect debt. Bad language or threats?
- Make sure the collections agency gives you the opportunity to dispute the debt.
Don’t hesitate to report any collector who is not following the guidelines of proper debt collections. Save yourself the hassle by paying off your cash advance in full and keep your long-term credit card debt payments current.
