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Pay in Installments or Full: Which is Better?

A debt collector lets you make payments in installments or a one-time total amount. Which one should the borrower go for?

Benefits of Paying in Full (in one lump sum payment)

  • You can almost always strike a deal to settle the debt for a lower amount (keep insisting). Installments result in more work for collection agencies. They would rather accept a lower amount ( like a 10% or a 20% lower settlement and waive off all interest and extra charges) than work on your debt for months. Moreover, if a borrower skips an installment in the future, it results in even more work for them.
  • Peace of mind. The matter is closed, and those pestering collection calls end.
  • If you have cash available or can arrange it, then closing the matter in one lump sum payment is best rather than dragging the case. Debt collectors are persistent callers. They get paid a commission on whatever you pay and will keep bugging you until the payment is made. 

Benefits of paying in installments

  • The borrower who pays in installments has effectively communicated to the debt collector that he does not have much money in the bank. He is genuinely tight on cash. He can usually settle the deal on the principal amount only and avoid paying any additional interest and fees.
  • It gives more time to pay and avoids immediate cash flow problems. 

Benefits of Both (Installments and Full Payment):

  • You avoid damaging your credit report.
  • No more harassment from collection agencies or their lawyers.

Filed Under: Debt Recovery

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