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| OKash advises that you don't ignore such a loan because of the adverse effects it may end up having on your creditworthiness and ability to borrow anywhere in future. |
In this article:
- The Steps That you Should Take
- Ways to Pay Off a Loan with a Collection Agency
- Do You Need to Notify Credit Reference Bureaus After Paying off the Loan?
During such a time of excruciating economic meltdown widely occasioned by the coronavirus pandemic, chances are that you could be struggling to meet your financial obligations like paying off your loans and it's even possible that one or more of your loans may end up or is already in the hands of a collection agency.
For starters, a collection agency/company is basically a recovery firm that offer debt management servics. In recent times, Kenya has witnessed a tremendous growth of these firms owing to growing demand for professional debt management services. Example of collection agencies in Kenya include among others, Nimble Group Kenya, Apex Collections, Skywave Management Services etc.
As such, a creditor may decide to transfer the task of recovering defaulted loans from debtors to these firms on their behalf. So, what are your options should your loan(s) end up with a collection agency? Well, you are not helpless under such circumstances but it's important that you don't ignore it because you're still legally responsible for the debt, after all.
Here's what you need to know to start the process of unhooking yourself from the tentacles of a collection agency as the leading digital lender, OKash, advises in its ongoing Financial Literacy Programme.
Steps That you Should Take
Once you learn that your loan is with a collection agency, there's no need to panic because it provides you with an opportune moment to take the matter head-on as outlined below.
a). Don't Ignore the Debt
You may be inclined to ignore the seemingly endless calls and text messages from collection agencies. However, ignoring the status quo won't help you, in fact it can make matters worse. Therefore, your best bet is to acknowledge and tackle the debt in question. Doing so can ease your mind and help reduce further damage to your creditworthiness.
b). Contact the Creditor
If your debt has been overdue for only a few months, the likelihood is that the loan collection will be handled by the creditor - your loan issuer. You will of course want to deal with the creditor before your debt is transferred to a collection agency for good.
c). Try to Work Out a Deal
When your loan is with a collection agency, the primary goal of the agency is to recover the money that it's owed in full or in instalments. Therefore, you may try to negotiate a way to wipe out the loan, such as by making the payment in a lump-sum or by committing to a mutually agreed payment plan.
Be sure to figure out how much you can afford to pay, either all at once or over time, before you make a settlement offer. However, before you begin the repayment, make sure you're clear about who to pay. If the original creditor is still handling your loan, you'll send your money to them. If the creditor turned over your debt to the collection agency, you'll pay that company.
Ways to Pay Off a Loan With Collection Agency
The best ways to pay off debt that has gone to a collection agency are to negotiate a lump-sum payment or set up a payment plan. Remember, beginning the process of paying off the debt is a big step towards unhooking yourself from the collection agency's grip and, eventually, to the debt.
Additionally, prioritizing the debt that's with a collection agency will help you a lot in avoiding further harm to your creditworthiness.
Do You Need to Notify Credit Bureaus of Paid Loan in Collection Agency?
Essentially, once you've paid off or settled debt that has been with collection agencies, you don't need to notify the three credit reference bureaus in Kenya - Metropol, TransUnion and Creditinfo. This is because the collection agency is supposed to report the wiped-out debt to the bureaus, which will list it as either "paid" or "settled."
Should the collection agency fail to notify the credit bureaus that your debt has been paid or settled, you can always reach out to the bureaus so that your credit report can be updated.