If you are carrying a heavy debt load, either with one or multiple creditors, installment payments might be tempting. Many debts that are not in collections are paid through installments. You pay a portion of the debt at a time, usually one time per month, in exchange for paying more overall as interest is applied to the balance. Once a debt is in collections, installments might still be an option but there are a few things you should consider before committing to an installment agreement.
How do you know paying a past due debt in installments is a good idea?
You Can Afford the Installments
First and foremost, you need to consider if you can afford the amount of the installment payments. When a large debt is past due, you might receive a settlement agreement that offers the payment broken into multiple installments or you will be given the option of paying the debt in full in installments.
Sometimes, the collector does nothing more than divide the large debt into two, three, or six equal payments. This might seem appealing, but the installments are still large and might not be something you can afford. It is essential you make sure you can afford the installment payments before committing to the plan. You might have the option of negotiating a longer installment plan, but if not, you are better off not committing to the payment plan at all.
For assistance calculating a monthly budget and determining whether you can afford a payment, use the Home Budget Calculator from Bankrate.com.
You are Not Paying Interest
Most installment payment plans in collections will divide the amount of your debt equally and there will be no interest applied, even though you are extending the length of time you have to pay it. You need to be sure there is no interest applied to the total you owe as a result of your installment plan.
You Have the Agreement in Writing
Finally, you need to be sure whatever installment payment plan you are offered has been defined in writing. Ideally, you will receive a payment agreement that is signed by both you and the debt collector. It should include the total amount of the debt, the amount of each installment, the date each payment is due (usually a specific day of each month), and the date by which the total debt is expected to be paid. This locks both you and the debt collector into the agreement, providing protection for both of you and ensuring the agreement will be honored as long as you make payments on time.
Installment payment plans can help you pay off large debts once they are in collections, but they are not right for every situation. Sometimes they are not an option at all. If you are facing a large debt load and you are unsure what to do next, we can help. Contact the Tampa Law Offices of Robert M. Geller at 813.254.5696 to discuss your situation.