Life is unpredictable and there can be times when one goes through difficult financial situations and is unable to repay the debts in time. While the intentions have always been to meet the obligations on due date, but due to some exigency or constraint, the default starts happening on the loan EMIs and credit card payments. This is the time when the collection agencies start to chase you to pay up.What should you be doing now? Read on to learn what is important for you to bear in mind while dealing with these collection agencies:
Do not get overwhelmed
Default does not mean the end of world. While being chased by collectors can be stressful, but there is no need to get traumatized. The whole objective of this follow-up is to collect the due amount but in case of genuine financial constraints, the lender might be willing to look at working out options. So please do not avoid collection calls. Rather, in case of a default, you may want to initiate a discussion with the lender proactively to explaining the situation and to put up a request to work out a plan that may suit both the parties.
Deal with the authorized person only
There have been many situations where the people have been approached by unauthorized people who claim to get your issue sorted out with the bank or lending institution. It is not advisable to deal with such people since it will lead to further complications and have a detrimental impact on your CIBIL score.
You can authenticate the collector by checking his ID card which is a must as per prescribed guidelines from the Reserve Bank of India.
Proof of payment
Under no circumstance should you pay the collector in case a receipt is not being given by him. Payment receipt again is a must as per prescribed guidelines.
Pay through cheque
It is advisable to make all payments through a crossed cheque only. This will not only keep a track but would help avoiding any confusion in future. Receipt for a cheque should also be collected while
handing it over to the collector.
Ensure that the payment goes through
Your responsibility does not end with handing over the cheque to collection guy. You also need to ensure that you have requisite finds to honor the instrument. It would reflect very poorly and shall get construed as intentional default if the cheque given to collector does not go through.
In case of a settlement
While settling a loan or credit card outstanding is not advisable since it shall again lead a negative flag reflecting on your CIBIL report apart from pulling down your CIBIL score further, there may be a situation where you are compelled to exercise this option owing to financial constraints. In case you do need to settle, please ensure that you are taking a settlement letter from the lending institution. First a letter on the total amount that needs to be paid to settle (this must also have the total outstanding as of now) and a time frame in which if you pay the agreed amount shall hold good.
Do not forget to take a receipt when making the payment to the lender.
Build a contingency fund
If you have not settled and have made full payment including the fine and charges levied by the lender, you now need to start building a contingency fund to be able to face any such challenge that you may face in times to come. Such a fund does give a lot of support in hard times.
Check your CIBIL report
Even if you have paid in full to the collection agency, please do not take an updation of credit bureau records for granted. There are innumerable instances where the credit report continues to show defaults and negative flags do not get masked even after payment. It is in your interest only to obtain your credit report and credit score to check if things are in order now. In case of an error/ records not getting updated, please raise a suitable escalation with the credit bureau and the concerned lending institution. An error or wrong update must get rectified else you can face challenge in getting your loan application approved.
Obtaining your credit report is a fairly simple task where you are required to answer few very easy questions to authenticate. Once the authentication goes through, it is a matter of just a few minutes where you would have your credit report in your inbox.
This should be done in about 60 days from the date payment has been made to the bank.
Please remember that you need to be careful while dealing with the collection agencies appointed by the lending institutions. Due care shall avoid confusion or loss of money.
Note-This is a guest post written by Mr. Arun Ramamurthy, author of “Unlock the Power of Your Credit Score” : India’s first book on credit scores. By publishing this, I am not promoting their service, not gaining any monetary benefits or in any way this blog is not associated with Mr. Arun Ramamurthy or freescoreindia. This is purely for knowledge sharing purpose from experts.