What Happens If I cant make a Repayment on my Loan or Credit Card?
Debts aren’t generally passed onto a collections department when you miss one payment or pay a few days later than you should have done. While different lenders will have their own process, typically you need to have missed several payments and not responded to letters and calls before an account will be passed onto collections.
If you feel you are getting into financial difficulty then you should look to contact your lender prior to missing any payments, to enquire as to whether you may be able to take a payment holiday, hardship, or to discuss a repayment plan within your budget. If you can negotiate an agreement, this will usually prevent an account from being passed to a collections department as it has been proactively dealt with and your lender has accepted a repayment proposal or granted a payment holiday.
Individuals who do not face up to their financial difficulties and look to avoid dealing with them are more typically those who see their accounts passed to collections. If this is proving too difficult or you are not getting the help you require it is Time to ring Money Buckets and get help with the situation.
If you do nothing this is What happens next.
If your account has been passed onto a collections department, your credit history will already have taken a hit and your account might already be considered to be in default. When your account is first passed on, you will usually receive a letter explaining that the collections department is now dealing with your account and a request for you to get in contact. While the thought of dealing with a collections department might seem intimidating, they are normally looking to work to resolve the situation for both parties. A collections agent may sign the letter, and they may request a face-to-face meeting at your home to discuss what options are available to you.
If you are uncomfortable speaking to a collections department on the phone, write to them explaining that you would prefer all correspondence to be in writing. You should aim to deal with your account with the collections department and come up with an acceptable repayment plan. This won’t change the missed payments or defaults on your credit file, but it will help you to work towards paying off your debt without the issue escalating further.
If things are becoming too hard to handle, especially when there is multiple collection agencies chasing you, give Money Buckets a call to take over on your behalf.
Failure to acknowledge the debt or to engage with a collections department could then lead to further action being taken.
Legal Action and Court Judgements
The next step a collections department will make is to pursue action through the courts to acquire a judgment and enforce the debt to ensure it is paid. Having court writs on your credit history can be hugely damaging, so you should look to avoid this outcome at all costs. You will have enough opportunity to deal with your account prior to legal action being taken, and if you are genuine about dealing with your debts or have Money Buckets negotiating on your behalf, there is no reason for this step to be necessary.Read more on Court Judgements (Link to Blog “ What to do if you get a court Judgement”)
As well as the additional damage a court writ will cause to your credit history, you will also be dealing with the stress of dealing with a legal case and potentially have to pay out sums of money for legal representation.
While no-one wants to encounter financial difficulties, sometimes it is a fact of life and we need to deal with it. By being proactive and speaking to your lenders and looking to deal positively with the situation, you will be able to avoid your debts ever being passed to a collections department, and prevent additional damage to your credit history.
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