4 mistakes to avoid when negotiating debt with collectors

When negotiating debt with collectors, knowing what not to do can save you a lot of headaches and save you from falling victim to a scam.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young casual man and girl using laptop while looking at invoice and plan the budget to save.

Image source: Getty Images

When negotiating debt with collectors, knowing what you shouldn’t do can save you a lot of headaches. If your debt has been passed to a debt collection agency, sometimes paying it off is the easiest way out. But if the debt is more than you can afford, trying to negotiate a settlement can be a lifesaver.

Before you start the process of paying off the debt, however, here are some of the biggest mistakes to avoid when negotiating debt with collectors.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

1. Sharing too much personal information

Debt collectors have a right to call you to request payment of the debt. However, if a debt collector asks for your personal information and you don’t feel comfortable sharing it over the phone or you feel the request is suspicious, simply say no. For example, a debt collector can ask you to confirm your name but there’s no reason for them to ask for your bank information.

You should also not volunteer corrections when negotiating with debt collectors. If the person calling mentions an address you’ve never lived at, don’t correct them. The more information you provide, the harder it will be to dispute a debt later on, should you need to.

If you’re suspicious that the company calling might not be legitimate or if  they are asking for too many details, tell them to contact you in writing instead.

2. Not confirming in advance that the debt is valid

Before you do anything else, you need to confirm that the debt collection agency is legitimate and that the debt is actually yours. Ask the caller for the debt collection company’s name, phone number, and address. If anything seems suspicious or feels like a potential scam, tell them to call you back later. You can then spend some time Googling them.

Always ask for details when negotiating debt with collectors. Who’s the original creditor? What’s the original debt amount? Then spend some time going through your records to make sure you really owe that money.

According to the StepChange Debt Charity, a creditor has six years to recover a debt before it becomes ‘unenforceable’. This applies to most debt, including credit cards, payday loans, and utilities arrears. Mortgage shortfalls and tax debts to HM Revenue & Customs are exceptions, with longer limitations period or no expiration at all.

If you believe your debt is old and might have expired, don’t pay anything. Once you pay, you acknowledge the debt is yours and might have to continue paying.

3. Not having an offer ready in advance

If you get a legitimate call from a debt collection agency, don’t agree to pay the entire amount. When negotiating debt with collectors, it always makes sense to offer a lump sum settlement if you can afford to. For example, if you owe £1000, you might be able to pay £500-£800 to close the debt. It all depends on what the company is willing to settle for.

To get the best possible result, you need to have a number in mind to give them. If the call catches you by surprise, tell them you’ll think about it and ask them to call you back. If you want to settle, you’ll have to pay the agreed amount in one go. You won’t be able to use a payment plan. So have an amount in mind that you can afford to pay right away. Once the offer is accepted, you usually only have a small window to pay the agreed-upon amount.

4. Paying before you have an agreement in writing

Once you’ve finished negotiating with debt collectors over the phone, get the agreement confirmed in writing. This is especially important if you are going to pay a settlement amount.

Never pay with a credit card over the phone during the initial negotiation call. At this point, you’ll have no offer in writing in front of you. If you pay over the phone, you will have no proof of the offer and no proof that the debt was completely satisfied.

Insist on a letter stating the original price of the debt, the discounted amount and wording that indicates the debt will be settled and closed if you pay that amount. Keep the letter for your records even after you’ve paid the amount.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

MyWalletHero, Fool and The Motley Fool are all trading names of The Motley Fool Ltd. The Motley Fool Ltd is an appointed representative of Richdale Brokers & Financial Services Ltd who are authorised and regulated by the FCA (FRN: 422737). In this capacity we are permitted to act as a credit-broker, not a lender, for consumer credit products. We may provide information on consumer credit, savings, insurance, loans, mortgages and investment products and services, but will not provide advice, or confirm the suitability of any product or service, for your specific circumstances or requirements, neither will we arrange these products on your behalf.

The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »