Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Dec 26, 2011

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One of the most annoying types of phone calls is from debt collectors. Whether the collector simply harasses a debtor or resorts to full blown threats, the interactions between debtor and collector are rarely pleasant ones. But what collectors don’t want the public to know is that a personal loan debtor (or those holding any sort of loan) has much more power than he or she usually realizes. Debtors need to be aware that they can put an end to many of the tactics collector’s use to squeeze money from defaulted borrowers.


Stop Calling Me


From calling upwards of 10 times a day to threatening to call the police to place a debtor under arrest, collectors use the phone to best of their ability. More often than not, a collector uses these tactics in order to break the will and force payment from a personal loan debtor. But repeated calls, offensive language, and threats are all illegal when it comes to debt collection methods.


Since they’re illegal, consumers can put a halt to such actions, and even make a collector cease all contact, with a simple written letter.


If a collection agency ignores the written instructions to stop contact, a consumer can sue the agency for breaching federal law. interviewed Robert Hobbs, deputy director of the National Consumer Law Center, who said statutory damages of $1,000 can be awarded in addition to legal fees in the event a debtor sues a collector who continues contact after being served a written notice to stop.


Wage Garnishment Requires Permission


In most cases, before debt collectors can reach into the bank accounts of personal loan debtors and intercept incoming checks, they must receive permission from the debtor.


Social Security, veteran’s benefits, disability checks, and, in some states, unemployment benefits are all protected from wage garnishment as a result of loan default.


But that doesn’t stop collectors from claiming they’ll begin tapping into those sources of income unless they receive payment immediately. As Jan Jones of the Alaska credit-counseling service explained to, “When you don’t know that that’s not possible, you’re going to do whatever you have to do to prevent that from happening.”


Before granting collectors permission to garnish wages, borrowers should be aware that most collectors aren’t able to touch that money unless expressly allowed by borrowers themselves.


Be Aware of the Statute of Limitations


Barring student loans, many different kinds of personal loans have a statue of limitations. In other words, if a consumer defaults on a personal loan and a collection agency doesn’t collect on the defaulted loan before a certain period of time elapses, then the loan can no longer be pursued through legal means.


However, collectors will try to trick consumers by calling and simply demanding a very small payment for the debt. If the borrower pays any amount (regardless of how small) towards the expired debt, then the loan’s statute of limitations clock is restarted, and the borrower may open themselves up to legal repercussion again.


Consumers can protect themselves against this practice by educating themselves on the statute of limitation laws in their state. State-specific attorney general websites can provide more information regarding the time limit associated with various lines of borrowing.


Record and Write


In order to ensure self-protection, borrowers need to learn to record every interaction they have with collectors, and get everything in writing.


If a collector calls a borrower, that borrower should document the time of the phone call, the name of the called, the nature of the call, any threat used, and the collection agency’s name. Having a written record of all of this information will prove to be invaluable in the unfortunate event a lawsuit comes to fruition.


Whenever an offer or declaration is made, make sure it’s in writing. If a borrower wishes for a collector to stop making phone calls, write a letter and send it via certified mail. If a debt collector agrees to change the terms of monthly payments or reduce loan principal, make sure to have a written receipt of the agreement and terms. Don’t ever rely on oral promises.


By following this advice, borrowers can avoid some of the common pitfalls and tricks collectors try to pull on the unsuspecting and uninformed.