Borrowers with arrears on their loans are often scared of getting a call or correspondence from debt collectors.
Debt collectors have a reputation for being fierce and nasty which drives some borrowers to evade them particularly if the borrower is still unable to repay any amount at the time of debt collection. However, avoiding debt collectors are more detrimental than simply facing them. Evading arrears will generally result in a big black mark on your credit file which will last for five years, so it is crucial to repay debts as quickly as possible.
- CEO of Prushka Fast Debt Recovery
- Roger is principal director of Mendelsons Lawyers
- Roger has also authored 2 business books - "The Ten Mistakes Businesses Make" and "Survival.Steering Your Business Through The Recession"
According to Roger Mendelson, Chief Executive of Prushka Fast Debt Recovery, their company is collecting debts of more than two million Australians for approximately 44,000 small to medium businesses. Prushka Fast Debt Recovery is one of Australia's largest privately owned collections company with debt collections from as low as $45 and the average debt is approximately $300.
"Any householder who has had unpaid debts over the years, the chances are they are on our database," said Mendelson. "By the time the debt comes to us, it's fairly seriously overdue."
Mendelson explained that when their client's customers are forwarded to them, these customers often have outstanding debts that are at least 90 days overdue. Mendelson advised consumers who are contacted by debt collectors to stop avoiding these collectors and should not regard the collection agency as an "enemy".
"My advice is if you can't pay, communicate by phone quickly and be upfront. Be polite … the worst thing people can do is ignore the debt because it puts them on the back foot," he said.
According to Tammy May, Director of MyBudget, unpaid bills can be resolved with debt collectors — just be upfront about your situation.
"Work with the debt collector, let them know your position, why you have fallen behind and what you can afford to pay back on the debt. Make sure it's realistic," said May. "Although it can be embarrassing and stressful to receive that type of call, it really is best not to bury your head in the sand and try and ignore it."
Debt collectors will not make customers promise to pay for an amount that they won't be able to pay in the end because at this stage, it is important for customers to follow through on their pledged repayment.
Some debts are permanently recorded in their credit file. However, May explained that it can be varied from case to case. There are lenders who specify in their policies that debts are not recorded on a consumer's credit file. Consumers should double check their lender's policy.
However, this does not mean that consumers with overdue bills are given a leeway – just a bit of leniency. In this regard, if a consumer is worried about getting that big black mark on their credit file, they are advised to discuss with their lenders a possible payment schedule for their debt whilst in financial difficulty. Consumers will be surprised by how lenders are more flexible than they project to be.Back to top