Many people do not realize the difference between a creditor and a collection agency. Because of this, misconceptions about the rules of how each can collect on a debt exist. To gain an understanding of these differences, it is important to first identify what both are and how they collect on outstanding debts.

What is a Creditor?

A creditor is the original entity that extended credit, service or a loan. This can refer to credit card companies, department stores, banks or any number of similar companies. Creditors are not generally the same as a collection agency, although many have their own internal collection departments.

How Do Creditors Collect on Debts?

First, creditors rely on consumers to responsibly pay their debts on time according to whatever schedule was originally agreed upon. This is generally done by a statement being sent to a consumer on a regular basis, which a consumer is then expected to pay on or before a designated due date. However, when this does not happen, creditors will usually charge late fees to the account, send a series of reminders and make phone calls in an attempt to collect on debts when accounts become delinquent. As time progresses, if an account remains unpaid, creditors will generally stop the consumer from using the account any further, send the account to their collections department or even hire an outside collection agency to work on collecting the bad debt.

How long does it generally take before an account is given to a Collection Agency?

This can depend, as each company has its own methods of dealing with bad debt. Usually, the process can be anywhere from three to six months. Communicating with the creditor and making an effort to make minimum payments can delay or completely stop the account from being assigned to a third-party collection agency. Once a debt goes to a collection agency, most consumers have lost any chance of negotiating with the original creditor.

How do Collection Agencies work?

Most collection agencies buy bad debt from creditors and attempt to collect on those debts for less than their original amount. Sometimes agencies will even work on a commission basis and creditors will pay them a percentage on what they are able to collect. It is not unusual for collection agencies to assign an attorney to attempt to collect on bad debt or resell a debt to another agency if they are unable to collect on it.

How far can Collection Agencies go in collecting on a bad debt?

The Fair Debt Collection Practices Act (FDCPA) regulates what collection agencies can and cannot do. Consumers should be aware, however, that the FDCPA only applies to third-party collection agencies and not to the original creditor or to its internal collections department. The FDCPA protects consumers by not allowing collection agencies to call a person’s home after nine at night or before eight in the morning. Collection agencies are not allowed to threaten a person, they are not allowed to call a person’s job if they are told that an employer does not allow collection calls, and they are not allowed to call personal friends and family members to speak to them about a person’s private finances.

Resolving Debt

Paying debts on time is always the best way to protect one’s credit rating while avoiding negative contact with creditors and collection agencies. However, when one falls behind in repaying a loan, credit card debt or other debts, a cash advance or a loan till payday may help. If bad debt continues to be a problem and accounts are referred to a collection agency, understanding how such agencies operate can be very important in learning how to communicate with them to resolve a debt.

You have the power to find the road to financial freedom

Everyone has financial power. Those who realize this know how to harness their power and use it for something great. Those who are unaware of their power end up misusing it to create excessive debt, bad credit, and a life of financial struggle. The following five keys can help you take control of your financial future and proceed toward prosperity.

Key 1: Resolve to make a change

Sure, many people daydream about having financial control over their lives, but without a dogged determination to change, they remain in debt. Instead, those who prosper are those who make a firm decision to do so. The first key to unlocking your financial power is to place your focus on making strong, positive changes in the right direction. Mark this date on the calendar, because it is the day that you are taking your first step towards prosperity.

Key 2: Let go of fear

Most people don’t want to stay in debt, but most people are afraid to take the steps necessary to get out of it. Some people have a genuine fear of handling money. Sure, they can spend it, but when it comes to actually balancing a checkbook, creating a budget or even speaking to bill collectors about debts owed, they prefer to bury their heads in the sand. This produces overwhelming feelings of financial inadequacy and does nothing but make a bad situation worse. The second key to unlocking your financial power is to face your fears head on. Whatever you personally avoid in handling your finances, make this the day that you simply stop and face reality with bold confidence.

Key 3: Build your confidence

It’s one thing to say you’re going to face your financial fears, but it’s another to find the confidence to do so. Financial confidence comes from financial education. Take a seminar on financial planning, read consumer-friendly books on personal finance, talk to friends and family members who have credit ratings and strong saving habits, and ask them for advice. Accept where you are, start right there, and take baby steps to educate and empower yourself for a better, more confident financial future.

Key 4: Face up to your credit report

If you’re determined to change and willing to face your fears, take the next step and order a credit report. People with bad credit often don’t want to face up to seeing their credit reports, but there’s no way to improve a disaster zone if you’re not even willing to look at it. Each year the three major credit bureaus allow every consumer one free credit report. If you don’t know your current FICO score or if you have no idea about what’s actually on your credit report, then it’s time to find out.

Key 5: Ask for help

Armed with concrete information about your financial situation and a new resolve to change, your final step to unlocking your financial power is to ask for help. Whether you need a personal loan or whether you need to consolidate debts, this is the time to seek help from professionals and people whose advice you trust. It can be tough to admit that you’re in over your head and need help, but it is better to speak now and reach for a helping hand than to continue to struggle with overwhelming debt. Financial counselors, credit counselors, and financial planners are easy to find in your local yellow pages or online. This may be a good time to shop around for one who can help you with your budgeting and financial concerns, so that you can begin your trek toward financial prosperity.

It’s never too late to improve your future

It’s never too late to make a change for the better. In unlocking your financial power, you will discover that you are fully capable of making the changes necessary to improve your future. If you’ve put this decision off for years, make today the day you stop making excuses. Commitment, persistence and confidence in who you know can be, will enable you to pull yourself up out of debt and live the life of your dreams.

A secured credit card is a good way to reestablish credit. Even for those who do not have a bad credit history, a secured credit card can be a safe way to control spending and avoid bad debt. Knowing exactly what these cards are and how they work helps people make sound financial decisions about their credit.

What is a secured credit card?

Some credit card companies actually exist to help people repair bad credit and control spending. They do so by offering people an opportunity to make a cash deposit in exchange for a credit card that will be secured by that deposit. The credit limit offered generally ranges up to 120 percent of the original deposit. This deposit also earns interest as long as the account is in good standing. Timely payments are reported to the credit bureaus, which can help people seeking to reestablish a good credit rating. Also, the credit bureau’s are never told that the credit card is secured and, therefore, it is featured on one’s credit report as any other credit card would be.

What happens if I default on the payments?

The reason that secured credit cards are considered safe is that defaulted payments are covered by the initial deposit. Late payments are also reported to the credit bureaus, which further damages a poor credit rating. Even with a deposit, people using a secured credit card must be responsible about paying their credit card bill every month on time.

How can I increase the limit on a secured credit card?

As discussed above, a person’s spending limit is set on a secured credit card in relation to the initial deposit. There are two ways to increase one’s credit limit, however. The first way involves adding to the deposit amount. Or a person can patiently await a second option, which involves an increase after accomplishing a good payment history during a set period of time, which is generally one year.

Interest rates and fees

Consumers with bad credit will most likely encounter higher than average fees with a secured credit card. Most also require an upfront processing fee and the annual percentage rate for a cash advance or for balances can also be high. However, the price for reestablishing good credit is usually worth the additional costs for people who use secured credit cards.

Cost, convenience, credit

While a secured credit card is more costly than a regular credit card, its reward is something that cannot be obtained in too many other ways. Those who have bad credit generally appreciate that such offers exist and many have made good use of them as credit recovery tools. The fact that they are not represented to others as a secured credit card is also a convincing factor to people, as they are able to rent cars, reserve hotel rooms and use them just as any other credit card as long as the spending limits are adhered to.
Because they require a deposit and credit limits are restrained by that deposit, some people find them to be inconvenient. Another way to view them, however, is to consider that a credit line that is limited, or secured, by a deposit helps to decrease the risk of overspending. As much as reestablishing credit, this simple fact makes a secured credit card an attractive choice for those who have had poor spending habits and a history of collecting bad credit card debt.

Borrowing money is a way of life for most people. Whether it is for a home mortgage, auto financing or a pricey item purchased on a credit card, most do not mind creating debt by borrowing money, as long as their dreams can be financed right away. While there is nothing intrinsically wrong with this, as long as a borrower can comfortably afford to repay their loan or credit debt, it is nonetheless interesting to consider why borrowing money is so popular.

Money and Happiness

Is it true that money cannot buy happiness? If so, why is it that so many people anticipate that it will? What is it about money that makes human beings feel as though, the more of it they have, the better they will feel about their lives? And why does it seem that some of the wealthiest people are also the most miserable and insecure?

Money buys satisfaction, not happiness

Researchers who study the psychology of money, including famed psychologist and esteemed Nobel laureate, Daniel Kahneman, have suggested that people believe money buys happiness because, when they can afford the material trappings of their dreams, even when this involves borrowing money to finance their purchases, such makes a statement to the world that they are productive members of society who are able to accomplish conventional goals that the rest of society is also striving for. It is this nature to compare and measure one’s accomplishments by this preset standard that is the true motivation. Therefore, people equate money with happiness, because their happiness has been defined by what their main social group strives to achieve. In reality, however, psychologists believe that money only buys fleeting satisfaction and not true happiness.

When researchers have delved more deeply into studies relating to money and happiness, they have discovered that people with a lot of money, when asked on a regular basis about their happiness, do not report being happier than people of lower financial rankings. Instead, these studies reveal that people with more money are often more satisfied and comfortable with their lives, but were also more stressed by the day to day demands of their career positions or the activities that they engage in in order to maintain their standard of living. So, while they were more satisfied, this stress actually hampered their actual feelings of happiness.

The media, money and illusions of Happiness

Because most people are bombarded with daily images suggesting that money equates happiness, those who feel like they don’t have enough of it often find themselves obsessed with chasing more money, while creating more debt and increasing their levels of stress. Very few images in the media, which emphasize happiness without a lot of money, exist and, therefore, most people’s minds are trained on obtaining more money while feeling unhappy or dissatisfied when they aren’t able to do so. Such leads to higher instances of people borrowing money that they cannot afford to comfortably repay.

Happiness vs. Satisfaction

Instead, those interested in the psychology of money and its correlation to happiness are encouraged to distinguish between what makes them feel satisfied and what makes them feel happy. Doing so, of course, is an inside job and will vary from individual to individual. While money is necessary for affording basic needs, such as food and shelter, those who earn enough to comfortably afford these are advised to study their own motivations for acquiring more than what they need, such as a larger, more expensive home, and why they are willing to go into debt in order to achieve such. There is nothing wrong with doing so, as long as one can afford to, but if a person is seeking more happiness in the process, they should recognize that happiness isn’t for sale and that the illusion that it is may very well lead them down a dark path of bad debt and bad credit.

If you are thinking of borrowing money, apply HERE!

Do you know someone with a shopping addiction?

Debtors Anonymous may be the solution many compulsive spenders are searching for. The frequent need for payday loans, bad credit and the inability to save money are all warning signs of compulsive spending. While the need for short-term loans and bad credit can also be attributed to unforeseen circumstances, such as illness or divorce, for many, they are also symptoms of a larger issue. It is because of these issues that Debtors Anonymous was created.

Control Spending Using Twelve Steps

Functioning as a twelve step program in the tradition of Alcoholics Anonymous and Gamblers Anonymous, Debtors Anonymous provides tools and support to help those with serious spending issues regain control over their lives, once again. With chapters all over the United States, including online meetings, many people have turned to them to stop cycles of bad debt and poor spending control.

Participation is Free and Groups are Widely Available

With Debtors Anonymous, membership is completely anonymous, as their name implies. Further, membership is not required for participation, nor are fees ever charged. Individual chapters are operated through committed volunteers who have experienced the perils of debt and, having survived their individual ordeals, are serious about helping others along the same path to debt-free living.

Shame-Free Help

Individuals who have tried following the debt reduction strategies detailed on this site and elsewhere are encouraged to take an honest look at themselves and determine whether or not they can truly manage to overcome debt without additional support. If the answer to this question is no, perhaps a group environment where support is given, accountability is expected and strategies are shared may help. There should be no shame in reaching out to Debtors Anonymous or other supportive programs. Although severe debt is known to cause intense stress, true shame comes with knowing that help is needed and that it is available, but avoiding it anyway.

Further, if debt is causing shame, excessive stress, depression or contributing to abusive behaviors, it is precisely these individuals who may need the help provided by a debt support group. Also, those who find themselves avoiding creditors or who are facing absolute financial ruin are encouraged to consider the possibility of what a helpful organization like Debtors Anonymous may be able to provide.

Assessing Spending Habits

A need for payday loans, alone, is not an indication of a serious mental or emotional problem. Neither is bad credit. Personal loans are a way to access fast cash when a serious need for it catches one off guard or when slight overspending has caused a temporary shortage of cash. At one time or another, almost everyone has experienced similar financial setbacks. However, those who find that they are seldom able to make it through a month without requesting a personal loan, either from a payday loan company or another individual, as well as those who find that they cannot stop spending money on miscellaneous unnecessary items – even when they know that they are strapped for cash – are precisely those for whom meetings provided by Debtors Anonymous are recommended.

No Excuses

There is no need to struggle with debt and overspending. Sure, many find themselves faced with these dilemmas, but usually find relief through a short-term loan or cash advance. In an economy where many are without jobs or have been faced with drastic financial hardships, a shortage of cash isn’t abnormal by any stretch of the imagination. Individuals who make a decent salary, but who find that they are still submerged in debt due to their own poor spending habits may find that Debtors Anonymous can help and should not delay accessing their services any longer.

Amid record foreclosures, home prices continue to fall at record rates.

Homeowners who lost their homes or fell behind on mortgage payments may be comforted to know that no credit check payday loans can help them in times of financial crisis. However, homeowners who are still paying off their houses probably won’t like what I have to say next: The value of your home has fallen, and it is still going down.

Home prices in the U.S. broke records in November, when they fell 18.2 percent. That is the largest month-over-month  drop the U.S. housing market has seen.

A new reality

Composite data from cities that Standard and Poor has tracked show that home prices have fallen every month for 28 months. It used to be that homes represented good debt, meaning debt that would later create a profit or return on an investment. No credit check payday loans can represent a lucky break for people who have fallen victim to bad debt and gotten black marks on their credit reports.

However, now it seems that homes are in the same boat as cars: they drop in value as soon as you drive them off the lot. Or, in the case of homes, they drop in value as soon as  you sign the mortgage papers. Now would be a great time to buy a home in cash, but we all know that about 1 percent of the population has enough money to do that.

A little help

For homeowners who are in danger of foreclosure, there is a glimmer of hope. The Federal Reserve today adopted some new policies to prevent foreclosures. Specifically, the Fed will modify mortgages that were “rescued” from Bear Stearns Cos. and American International Group Inc.

For people with touchy credit who need to be rescued from overdrawing their bank accounts, no credit check payday loans can save the day.

McCray-Miller says she plans to introduce the bill after the Legislature convenes Jan. 12.

Necessity

The recession has wreaked all kinds of havoc on the everyday lives of Americans. However, it’s also causing people like McCray-Miller to assess the causes and come up with solutions for preventing a repeat performance.

McCray-Miller says, based on Americans’ increasing debt, education is needed for individuals to avoid another financial crisis. She argues that children learn by example, and they have watched their parents (and their government) accrue debt all their lives. Her aim is to break the cycle.

While a payday loan may be a welcome relief for someone in a bind, it’s certainly ideal if people can prevent financial emergencies when possible.

If it ain’t broke … oh wait, it’s broke

I think we are well past the point that people can argue there’s not a problem. Yes, we can blame mortgage lenders and creditors for causing this recession. But while we can’t directly control what investments banks and government entities do with their money, we can control what we do with our money.

Some factors that went into causing this recession couldn’t be prevented. However, educating children about the dangers of accruing bad debt is a step in the right direction toward a generation of individuals who are more capable of financial freedom.

Lesson plans

A 2003 law in Kansas already requires financial literacy to be included in Board of Education guidelines for lesson plans. Apparently this law isn’t clear enough, because some schools still don’t teach the topic. McCray-Miller’s hope is that her law, if enacted, will require that students be financially literate in order to graduate.

So what should be included in personal finance education? Well, I have a few ideas. First, if children learn the difference between good debt and bad debt at a young age, they are more likely to avoid bad debt. Also, students should know how to assess whether the terms of a loan are realistic. With this kind of education individuals will learn how to manage their finances in a smart way and avoid risky deals, such as sub-prime mortgages.

Impressionable age

Some may argue that Kindergarteners are too young to understand personal finance. I believe if the subject is broken down into its simplest, most rudimentary concepts and then built upon year by year it will be successful. It’s like learning math. First, you teach counting, then addition, then multiplication and so on.

So first teacher would educate students on what debt and credit are and then go from there. If students can understand the difference between negative and positive numbers, they should be able to understand debt. After they understand the concept of debt, teach what kinds of debt are dangerous. If children learn this at a young age they are more likely to believe the concepts are true and avoid financial hardship in the future.

Hope for the future

Emergencies do come up, and with so many people teetering on the poverty line, there will likely always be the need for an occasional payday loan. However, starting financial education at a young age will help the next generation to be smart about their money, even in tough times.