Applying for a loan isn’t difficult, especially if you have a good credit score, debt profile, and financial background. However, the issue with taking a loan is often evident when the due day is approaching, and you haven’t still figured out how to settle what you owe. Usually, if you default on a loan for too long, it’ll be sold to debt collectors, who are brutal in their debt collection effort. A collector can sue you if you aren’t corporative. But, is it all debts they sue for? What is the least amount a collection agency will sue for?
Due to the expenses that come with lawsuits, collection agencies will only sue for large debts. The amount differs per collector. However, expect a collector to sue for debts that are more than $1000 or a little higher depending on the cost of a lawsuit.
Once you stop making payments on a debt, the creditor can decide to sell it to a collection agency. If that happens, the agency will be in charge of collecting the debt. And trust me, they may adopt annoying and frustrating to compel you to pay what you owe. If somehow the constant calls, emails, and visits don’t work, a collection agency will sue for defaulting on the loan or may threaten to do so. Of course, not all agencies will sue anyway, especially if what you owe is meager. And we progress, I’ll reveal the minimum amount a collection agency will sue for.
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What Is the Minimum Amount That a Collection Agency Will Sue For?
When people have dire expenses on their neck and insufficient money in their bank account or credit card, they usually seek loans. Taking loans is a good way to access the money you don’t have to finance those dire expenses like hospital bills, house purchases, care purchases, and so on.
While there is no doubt that loans are good, those enmeshed in several debts would say otherwise. Today, many debtors are finding it hard to cater to themselves not to speak of pay their debt. Sometimes, we cannot blame these individuals. With the $11.80 average minimum wage and the average American earning $48 516 per year, people will often struggle to pay back loans, especially the bigger loans with higher interests.
This is why you must draft a repayment strategy before seeking a loan and only seek loans that you are confident of paying off within the required timeframe.
What Will Happen if You Default on a Loan?
If you default on a loan, the creditor may sanction you by raising the interest rate and including late payment fees. However, if the creditor becomes impatient due to your inability to pay what you owe, he or she may sell the debt to a collection agency.
Who is a collection agency? Can a company send you to collections if you are making payments? I’ll answer these questions as we progress.
What Is a Collection Agency?
A debt collector is an individual or agency that collects payment for delinquent debts sent to the collector by the creditor that originally issued the debt. Companies often use the services of this agency because if they continue to use their resources to chase payment on delinquent accounts, they’ll run at huge losses.
Debt collectors also include debt buyers that purchase old due debts and make an effort to collect them. Policies for sending accounts to debt collectors vary among creditors and lenders. You should review your credit card or loan agreement to understand your creditor’s timeline.
Most credit card accounts are sent to collection agencies after some months of non-payment. Other companies may decide to send accounts to these agencies after a month or two of missed payments.
N: B Ensure you are familiar with debt collection laws, so you aren’t harassed by an agent.
Can a Collection Agency Sue You?
A collection agency can sue you if you are not corporative. This is usually an attempt to collect a debt. A lawsuit from a collection agency can add to your problems, which include a smeared credit score. Thus, it is best that you make an effort to clear your debt to prevent further issues.
Some people are often confused when dealing with these agencies. You see people asking questions like, “should I pay debt collector or original creditor?” If your debt is sold to this agency, you’ll have to make payments to them. And if you don’t pay collections, expect the worst.
With that said, what is the minimum amount that a collection agency will sue for?
Because lawsuits are expensive and slow, collection agencies will only sue for large debts. For example, you don’t expect the agency to spend $5,000 in debt collection attorney fees and court fees for a debt worth $2,000. However, while big creditors wouldn’t sue over small debt, small creditors can, as they may not have the financial capacity to write off the debt.
A general rule of thumb is, if you owe below $1,000, there is a huge possibility that the agency wouldn’t sue you. Rather, they will seek other effective alternatives like the repossession of collateral (if it’s a secured debt).
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How Much Do Collection Agencies Usually Settle For?
As I said earlier, if you default on your debt for too long, your creditor will have no choice but to sell it to a debt collector. But why? What can debt collectors do? Creditors usually sell debt to take the burden off their shoulders. These collectors usually adopt frustrating and annoying tactics in compelling debtors to pay what they owe. Worthy to note is that not all collections agencies will demand that you pay your debt in full. With that said, how much do collection agencies usually settle for?
The percentage differs per collector. For example, some collection agencies may request that you pay 75%-80% of what you owe. Others will be ok with 50%, while others might settle for one-third or even less.
Rather than avoid these agencies who can be annoying, it makes sense to negotiate with them. Who knows, maybe doing so may help you escape lawsuit.
