How Much Does it Cost to Hire a Company to Collect Your Debt?

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Collection agencies are used by businesses to recover money owed by individuals or other businesses. The cost of using a collection agency can vary depending on a few factors. Firstly, the amount of debt owed. Some collection agencies work on a contingency basis, meaning they only get paid if they are successful in collecting the debt. These companies typically charge a percentage of the amount collected, somewhere between 25% to 50%. If the debt is really old and has been written off by the original creditor, collection agencies might purchase it for a fraction of the original amount, sometimes as low as 1% of the total.

Another important factor that can affect the cost is the type of debt being collected. If the debt is classified as a medical bill or a student loan, collection agencies are allowed to charge higher fees in some states. In addition to these fees, there may also be legal costs if the collection agency decides to sue to recover the debt.

Lastly, the size of the collection agency can affect the cost. Larger agencies typically have more resources, which can help them to collect debt more efficiently. However, smaller collection agencies may offer a more personalized service and charge lower fees.

It’s important to keep in mind that using a collection agency can have negative consequences for your credit score, so it’s always a good idea to try to negotiate with the original creditor before involving a collection agency. Collection agency cost may seem steep, but it might be the last resort for some people.