When you are behind on your payments, one of the options that you might explore is working with a collection agency. Collection agencies can be a great resource for catching up on your payments and avoiding legal trouble. However, it’s important to understand what Collection Agency Cost entails before making any decisions.
Collection Agency Cost can be broken down into three main categories: Fees, Interest Rates, and Penalties.
Fees: Collection agencies typically charge a flat fee or a contingency fee. A flat fee is a set amount that you will pay regardless of how much is collected. A contingency fee is a percentage of the debt that is collected. Collection agencies typically charge between 20-50% contingency fees.
Interest Rates: Collection agencies may also charge interest on the debt that is owed. The interest rate will depend on the state in which you live and the collection agency itself. Collection agencies cannot charge more than the legal limit for interest in your state.
Penalties: Collection agencies may also charge late fees and returned check fees. These fees are typically between $25-$35.
Knowing what fees a collection agency can charge is important before you agree to use their services. Be sure to ask about all fees upfront so there are no surprises later on.