7 Reasons to Pay Off Your Debt Collections
There are two reasons why a debt collections agent could come after you. First, you may have a legitimate debt. This situation can come about due to a credit card, automobile loan, cell phone payment plan, or any other purchase that you chose to finance. The second reason is for illegitimate debt. The most common form of this is a collector asking you to pay in place of a deceased family member. If you believe the debt they are trying to collect is invalid, you should refuse to pay it and speak to a lawyer. If it is genuine, your best bet is paying it as quickly as possible. Below, we explain why.
Stop Collection Requests
When you do not pay a company the money you agreed upon, they start to contact you. In the beginning, that might mean a phone call or email. As you ignore these requests, their efforts grow. Eventually, they will likely outsource pestering you to a debt collections agency. The way these agencies make money is that they buy debt from other companies. After doing so, they pursue collection themselves. What this means for you is that they will not stop hassling you until they get the payment they want. After all, their business relies on doing so. The result will be constant emails, phone calls, and even house visits. Paying your debt helps you avoid these annoyances and frustrations.
Approval on Future Loans
In life, there are many excellent reasons to take out a loan or line of credit. Perhaps you want to buy a car or own a home, and the only way to do so is borrowing money. Unfortunately, many banks will not lend to you if you owe money to a debt collections company. The way they’ll find out is through your credit report, which will indicate your status. While paying your debt will not remove reference to it from your report, it will look significantly better in the eyes of a lender. You don’t want to find yourself begging a loan company to give you a chance on one of the most important purchases of your life. Instead, you can pay your debts and show them that you are a reliable prospect.
Improve Your Credit Score
One thing that you discover when you delve into the world of finance is that your credit score is incredibly important. Not only does it dictate approvals for things like car loans, mortgages, and credit card, but it often impacts interest rates. The best example of this is mortgage rates. Those with high credit scores are considered safe investments and thus receive low interest. On the other hand, those with low scores receive much higher rates. At the moment, a percentage difference does not look like much, but it is frequently worth many thousands of dollars over the typical 30-year mortgage. Two additional affected areas that have nothing to do with loans are apartment rentals and employment. Both of these frequently lead to credit checks, and a paid debt looks much better than one that is outstanding.
Protection From Lawsuits
Many people believe that if they ignore their debt, it will go away. The reality is that there is only one situation in which this is true. Every debt has a statute of limitations, which is an amount of time in which it is legitimate. While it varies from state to state, the statute of limitations on most debt is around 3-10 years. Once that time passes, debt collections agencies will struggle to collect from you. Unfortunately, a collector will often bring a lawsuit against you before that happens. At this point, you will start to accrue lawyers fees, which might end up costing more than the debt itself. The last thing you want for your finances, legal record, and mental health is undergoing a lengthy lawsuit against a company with much more funding than you. Instead, you can negotiate with the collection agency and work on a payment plan.
Freeing Yourself From Debt
When you decide to take charge of your financial situation, you should prioritize debt-reduction above all else. The reason is that debt follows you wherever you go. If you want to open a new credit card, that company will find out about what you owe. The same goes for buying a car, purchasing a home, renting an apartment, finding a job, and more. Rather than running away from your bills, you can meet them head on and pay them down.
Paying Off Debt Helps Your Future
The other side of this issue is that you want to set yourself up for the future. The cloud of debt hanging over your head does not only affect purchases you might make. Instead, it inhibits you from saving money and building a bright future. Here’s how that works:
• You have an outstanding debt of $10,000 that accrues interest at 7%
• You want to prepare for your future by saving money
• You ignore your debt, instead opting to put your extra money in a savings account
• Your savings account accrues interest at only 1%, meaning your debt is growing faster than your savings
To build your future effectively, you need a clean slate. Paying your debt collections requests will help you make that happen.
When you owe money to a debt collections company, you don’t get a moment of reprieve. Instead, they call, text, email, and visit you frequently. Sometimes, they find channels of communication that you never thought possible. If you continue to withhold payment, they may take you to court, which will require your attendance. Between constant contact, threats, and legal battles, not paying your debts will lead to a significant amount of stress. Despite how appealing it may seem to forget about your debt, doing so will lead to more anxiety than paying.
One thing to remember is that you are only one person, while a debt collections agency is made up of many. This means that they can send agents at you around the clock. When one of them grows tired of pursuing your case, another will take over. Meanwhile, your side is made up of only you. No matter what, they will outlast you, so the best thing for your mental state is compliance.
If your debt is legitimate, then you signed a contract saying that you would pay it back. Whatever reasons you may have for not paying, the fact is that you made a promise and never fulfilled it. While you might not feel it directly, this will negatively impact your self-esteem. You will see yourself as a person that skirts their obligations rather than facing them, which is not the kind of person most want to be. On the other hand, paying debt is often an incredibly empowering experience. You get to take a mistake you made and rectify it little by little. First, as you start on that path, you will instantly begin to feel better. Next, when you make legitimate progress, that feeling will grow. Last, when you pay your debt entirely, you will feel like you can take on anything.
When the debt collector gives you a call or knocks on your door, your instincts may tell you to try and avoid them. Unfortunately, this strategy will come back to haunt you in a variety of ways. Instead, you should pay that debt, put it behind you, and start your journey towards financial bliss.