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What You Need to Know About Debt: Lessons From a Debt Collector
Debt collectors don’t want to call you any more than you want to call them.
Or at least, some of them don’t. Like Grayson Bell, who left his job as a debt collector for a major mortgage servicing company after realizing he preferred to help people in bad financial straits rather than harass them.
In keeping with that mindset, he recently spilled some insider secrets of the debt collection trade in an article on Daily Finance — and if you have any debt, from a mortgage to a credit card, it’s worth listening up.
What Creditors Don’t Want You to Know
In his post, Bell discussed some of the things he wished borrowers knew, both about the debt collectors who call them in the middle of dinner and about the somewhat shady practices of lenders.
His revelations included:
Questionable Payment Processing
You may have sent your payment in on time, but some lenders hold your check and then charge you a late fee. They may also double-charge your account if you authorize an automatic bank draft — and give you the runaround when you try to clear up the mistake.
Grace Periods Mean Nothing
Your mortgage statement may say you have until the 16th to make your payment (that was due on the 1st) before you incur late fees, but collectors don’t always honor these grace periods. If you don’t pay your bill by the date it’s due, you’re at risk for a collections call — or several.
Collections Agents Can’t Help You
While Bell tried to give borrowers advice whenever he could, it was frowned upon by his company. In fact, he was written up several times when he was caught helping someone on a monitored call.
What does all of this add up to? A clear warning to debtors: If you’re in any danger of missing a payment, make things right ASAP, because once your account hits collections, the odds are stacked against you.
There’s also a warning for those thinking of incurring debt: Make sure you can handle the payments on whatever amount you’re borrowing to avoid this mess altogether.
How to Avoid the Dreaded Collectors
Don’t charge more than you can afford to pay off. Seems like common sense, right? But that doesn’t mean people listen to it. North Americans are notoriously bad at managing their credit, so this advice is worth repeating. If you can’t afford to pay an something off in full when the statement comes in … don’t buy it!
Find new sources of funds. If you’re eyeing something you can’t quite afford, it’s time to get smart about alternate ways to finance it. Try one of the many ways to earn money online; we’ve covered a number of them already. Or, you can play the waiting game and end up saving in the long run.
Looking to start a business? Skip the personal loans and try raising money on Kickstarter. Borrowing should be an emergencies-only last resort.
Only use credit cards if you’ll get something in return. Don’t see plastic as a means to acquire things you know you can’t afford; use it strategically to qualify for promotions and signup bonuses. When you use them well, you can actually wind up making money with your credit cards.
Rethink your mortgage debt. Struggling with a mortgage you can’t swing? Consider downsizing to a more affordable home, trying one of these money-saving hacks or even selling ad space on your home (seriously, it’s a thing).
Many of the people Bell called had stretched themselves too thin taking on mortgages they didn’t have the means to pay for. Regardless of what your bank approves you for when you’re house hunting, make sure you’re only borrowing what you know your budget can afford.
Your Turn: How do you avoid debt? Or, if you’ve recently dug yourself out of debt, how did you do it?
Kelly Gurnett is a freelance blogger, writer and editor who runs the blog Cordelia Calls It Quits, where she documents her attempts to rid her life of the things that don’t matter and focus more on the things that do. Follow her on Twitter @CordeliaCallsIt.