You may think all kinds of debts are the same, but different debt types have other payment plans, tax implications, and impacts on the credit score. Therefore, mentioning different kinds of credit card debts on the credit report would be beneficial for you as it will show the lenders that you can balance the finances. Here we will mention different debts and why you should hire a debt collection agency to recover a delinquent account.
Credit Card Debt
Loan type – Credit card debt is a revolving account that means you do not have to pay at the loan term-end – usually the month-end. This is an unsecured loan which means it has no collateral or asset like a house or home or any other physical property that lenders can repossess to recover your credit card debt if you fail to pay off.
How to pay – If you carry debt, always pay the minimum debt amount every month or according to the payment plan to stay in good standing. However, if you keep paying the minimum amount only, the interest charges will accumulate, and the total amount will be higher and tough to pay off ultimately. So try to pay off the debt as much as possible, more than the minimum amount – it will be easier for you to deal with the debt.
Tax implications – There are no tax implications since the credit cards debts are not tax-deductible.
Credit score ramifications – Your credit score would be good upon having a consistent payment history for an extended period. It would help if you were very careful of opening multiple accounts or reaching too close to the credit limit.
Why hire a debt collection agency –
There are countless laws governing the debt collection industry and the customers are well-informed about their rights. If you violate any consumer law, you may get a notice since they would not hesitate to sue if the rights are violated. Since the debt collection agencies are well-versed in the laws, all the associated parties remain legally protected.
Successful Debt Recovery
The collection agencies are experienced in unpaid debt collection; therefore, an agency increases the possibilities of recovering delinquent accounts. When your primary concern is running the business, the debt collection agency focuses on debt collection. The trained professionals are acquainted with the best debt collection techniques and are more significant threats to the debtors than you.
The collection agencies know that their clients (the creditors) have unique needs, and they provide service accordingly to fit in properly with the business model.
Loan type – An auto loan is a type of secured loan. This is always paid according to a payment plan. The payment arrangement has several payment slabs that are agreed to pay over a period. If you stop making payments according to the plan, the lenders will sell off the car to get their money back.
How you pay it off: Since this is an installment loan, this loan is paid off in certain monthly payments over a pre-agreed time frame.
Tax implications: There is no tax implication since the payments for an auto loan are not tax-deductible.
Ramifications for your credit scores: Like any other debt payment, making on-time payments for your auto loan would help you to create a good credit history and score.
Why hire an agency
A dedicated team
An automotive debt collection team always consists of dedicated professionals who will help to recover owed debts for their clients. A vehicle loan collection team would always be persistent in recovering money from the defaulters following a legal approach. They also do not compromise the safety and security of the clients’ business.
Foster strong relationship
When it comes to financing a vehicle, financial institutions lend and borrow a lump sum amount to benefit both the creditor and the debtor. But the relationship between the two can go wrong if the debtor is harassed for money. But the creditor also needs money flow to continue the business operation. In this case, an automotive debt collection can help recover the money and set a convenient plan for both parties.
An automotive debt collection agency holds experience in collecting for a car loan but is also proficient in recovering other debt types irrespective of the volume and period.
It has been seen in multiple cases that a debtor leaves the region and changes contact details without updating the creditor. As a result, the creditor gets into trouble to contact the debtor to recover their delinquent amount when the payment is stopped for long. What a creditor cannot do, a debt collection agency can do. They have a huge database and access to the database across the region to track down the debtor easily.
Loan type: Medical debts are not usually planned and this is not secured debt. It means it has no collateral that can be sold to recover the debt amount. Since this is not planned, it has no set payment structure and time frame. The hospitals and healthcare service providers have a billing department and for your medical debt, you can contact them to set a payment plan if you are unable to pay the entire amount at one go.
How you pay it off: The payment process of a medical debt depends on the concerned hospital or the doctor. Ideally, they want the patient family to pay off the debt at once. However, since the medical debts are never planned, it is considered more sympathetically. Often, the patients are unable to pay the entire amount at once because of costly and extended hospital stay, and often the health insurance is not enough to pay the bills. Therefore, you should talk to the healthcare service provider for a customized payment plan.
Tax implications: A qualified medical expense exceeding 10% of the adjusted gross income would be deducted from the federal tax.
Ramifications for your credit score: If your healthcare service provider turns to a third party debt collection agency, it will drop the credit score. Unlike other debts, it takes longer to move to a debt collection agency. The major credit bureaus decided in 2017 that there would be 180 days waiting period before a medical debt moves to a collection agency. Similarly, if the debt moves to the credit report and the insurance company pay it later, it will be mentioned as paid.
What a Debt Collection Agency Can do
Reduced Recovery Costs
Outsourcing the responsibility of debt collection to a debt collection agency would help the creditors to cut down the recovery costs. Here the creditors can also save expenses related to hiring, training, and keeping track of new staff hiring for the debt recovery process.
Better Focus on Providing Healthcare Services
Medical debt collection is even more daunting when you are not a debt recovery expert. This can get on your nerves to find and track patients who have changed their address, contact details, and more. In addition, it will be troublesome to negotiate with the patients and other recovery processes if the illness impacts the patient’s earnings.
Nevertheless, if you get in touch with a debt collection agency, you will have the much-needed peace that your debts will soon recover.
The experts will go beyond their capacity to recover the debts and clear the accounts. Moreover, they will help maintain the regular cash flow for your business.