Before I moved to Waco, TX to pursue my dreams of becoming a Psychologist, I lived in Gilbert, AZ and worked full time as a bill collector.
Never thought I’d see myself ending up in a cubicle, but there I was…
And while I was there, I learned so much about life simply from helping my customers over the phone. What I loved about my old job was that we were all encouraged to be reasonable with our customers and practice patience with them. This one thing set us apart from other bill collectors, and gave me the opportunity to really understand where my customers were coming from.
Although my parents always taught me about money, there’s just something different about experiencing something for yourself as opposed to taking it from someone else.
I know you guys might not find yourself becoming bill collectors anytime soon, but I hope that I am able to give you the inside scoop of what it’s like being one and the financial information I learned so as to not become a customer in collections as well.
Number 1: Interest Builds. FAST.
I worked for an auto finance company, and one of the first things I had to learn about in order to be successful at my job was simple interest loans. Where I worked, every single customer had a simple interest loan. For more info on them, you can click here. (Note: I did not work for Chrysler auto finance. I just really like this video to explain simple interest loans.)
If you watched the video (or you already understand how simple interest loans work), then you can see how making payments late increases the time it takes to pay off the loan. In addition, if a customer is constantly paying late, the next payments they make toward the loan will go to satisfy that interest they had accrued previously instead of the interest they owe now with the principal amount of the car.
In other words, I had some customers who were a couple years into their loan, and each of the payments they were making were still going solely to interest. Like, they hadn’t paid $2,000 for the principal amount of the car.
Not only that, this can be extremely hard when customers are sold a car with an outrageous interest rate. I believe the highest I saw was about 25%.
Don’t do it.
Number 2: NEVER Make a Payment Late
This ties directly to Number 1.
The interest rate for your loan doesn’t go down over the time of your loan. The principal does. (Assuming you’re making payments when you should be.)
For example, let’s say that you start with a $20,000 loan with a 12% interest rate. At the beginning of your loan, you’re paying 12% of that $20,000 that you owe. But let’s say that after a few years of paying your loan, you owe $12,000 in principal for your loan. Your interest rate doesn’t go down; you will now be paying 12% of that $12,000 that you owe.
As time goes on, interest still accrues.
Making payments early pays more of that interest upfront instead of letting it accrue until your due date, or worse, past your due date.
When you make a late payment, you’re not only paying the interest you already had on your loan, you’re now also having to pay the interest that accrued every day past your due date. And believe me, the farther you get, the harder it is to come back from. I’ve personally seen accounts that were upwards of 60+ days past due. Those accounts are very hard to work for a variety of reasons.
Save yourself; make payments on time.
Number 3: Try to Pay Your Loan off Early
This is so rewarding in so many ways.
When you pay before you’re due date, you’re essentially cutting how much interest you are paying and more of that payment goes toward the principal instead. The same thing happens when you pay more than what is due. (But if you’re trying to knock out 2 or more months at a time, call ahead and make sure you’re money goes to the months you’re trying to pay. I’ll explain more on this later.)
Paying early pays your principal earlier, and ends your loan faster. The faster you end your loan, the less interest you’ll pay and the more money you’ll save!
Number 4: Know When Your Due Date Is
I was shocked at the number of customers I had who didn’t know when their due date was.
Like…really? You get a bill in the mail once a month. It’s on the website. We called you. You signed the dotted line yourself!
Not knowing when your due date is can be terrible when trying to make payments on time. I’ve had too many customers call in to make a payment just to find out that they’re a month behind because they weren’t paying attention.
Number 5: Don’t Ignore Your Late Fees
Now I can’t speak for every financial company out there, but if they’re anything like the one I worked for, they make you pay all your late fees as a lump sum at the end of your loan if you ignore them.
And sure, you might think, “Pff that’s no big deal.”
Ha! Lemme tell you a thing:
When I would get a customer who was nearing the end of their loan, used to paying late with $1000 left for the principal, $500-2000 in late fees, and they can’t make a payment, it would be the most frustrating conversation.
Paying your late fees upfront or at least as soon as possible eliminates any confusion and stress when you get to the end of your loan.
Number 6: Pay Attention to Where Your Money Goes
Every blue moon I’d have a customer call in a panic because they thought they just paid for the next 4 months of their loan and see they’re due the month after they paid it. I always applaud customers who pay their loans early, but here’s the thing:
Sometimes if you pay too much before a payment is due, that extra money will go straight to the principal.
Now this can be a good or a bad thing. It’s all a matter of where you want your money to go. If you leave it to the principal, congratulations! That’s more of the principal that’s paid off, but you’ll still be due the upcoming month.
If you wanted it to go to the next 4 months, congratulations! Your next 4 months are paid for, however it will be applied as per your due date, meaning you didn’t pay any interest early.
I’ve also seen way too many customers who try making a payment on a Sunday (don’t tell me you didn’t know the bank doesn’t run on Sundays. I don’t want to hear it), bouncing a check, sending more than one payment, etc. and not realizing that they’re late or a payment doesn’t go through. Then they call in all upset because they weren’t paying attention to their own bank accounts. I remember thinking to myself on a number of occasions, “How are these people adults and how did they make it this far in life?!”
Either way, it’s a good idea to know exactly where your money is going instead of just leaving it to the bill collectors. You’re an adult now. Time to be responsible.
Number 7: Life Happens. Make Sure You’re Prepared.
I remember personally knowing a fully grown woman who didn’t have a savings account and personally feeling frightened for her should the time come that she will need money and wouldn’t have it.
I don’t understand not having a savings account, but for those of you who don’t,
please, for the love of everything, go get one.
Emergencies WILL happen!
I actually remember one customer in particular who had just started their loan. They had only made 1 or 2 payments for their car. Suddenly, his wife went into labor prematurely and lost the baby, landing her in the ICU in critical condition. He spent all his funds on trying to get his wife back on her feet, which is always the right thing to do.
However, he was now late on his $700+ car payment and didn’t know when he could make another…
And because his loan was fresh, there was nothing I could do to assist him (as far as a deferment or forbarance).
And he was locked into this loan for the next 5-6 years of his life.
This is a true story and I remember my heart aching for him. Emergencies happen all the time, so make sure that you’re always prepared. You never know what life will throw your way.
Number 8: If You Can’t Afford it with Cash, You Can’t Afford it at All
My mother taught me this at a very young age:
“Baby, if you have $50, you don’t have$40 to spend. You don’t even have $25 to spend. You might have about $10 max.”
My family doesn’t believe in staying in debt, and the only one we have now is for my and my sister’s schooling. I am 22 and have never had a credit card, nor do I plan on ever getting one. (No, you don’t need one to build credit. I’m building my credit just fine.)
I saw this all the time as a bill collector. A lot of our customers in Texas worked in the oil fields, which is some pretty intense work. Therefore, they get paid a very healthy amount. So it was pretty normal for me and my coworkers to see these customers purchasing vehicles upwards of $70,000+.
But the oil industry is constantly fluctuating.
So work was not steady.
Guess which customers we constantly got calling in specifically for a deferment or a forbearance?
Yeah. Those conversations weren’t fun.
My job as a bill collector wasn’t just to bring an account current, but to keep it current. This meant talking about what happens after assistance and keeping the customer accountable.
But the general public doesn’t like being called out on their mistakes nor do they like to be held accountable.
Do yourself a favor: don’t try to get something you think you can afford based on the “now”. If you have a salary of $100,000, you can’t afford a $70,000 car.
A $30,000 car will get you to all the same places.
Number 9: Don’t Forget Changes You Made to Your Account
I can’t tell you how many times I had a customer tell me the following:
“I don’t remember.”
*insert frustrated grunting noises and a few expletives here*
You are a grown human being.
If you get assistance, change your due date, get your car refinanced, keep up with your loan! One of the most frustrating things working as a bill collector was getting a customer who acted like they had no idea what was going on.
Especially if we just talked to them a few days ago.
I appreciated the customers who made note of who they talk to, when they talked to us, and marked their calendars. You might think you’re being a control freak, but we in the office talked.
We like you.
You make our jobs easier.
Number 10: Understand Your Loan, Contract, Etc.
There is absolutely no shame in not understanding something in your contract, but make sure you ask questions before you sign your name on it.
Otherwise, it’s pretty much your fault for whatever situation in which you find yourself. Like, there’s no mercy or sympathy for you…
I remember having a customer who called in simply to make a payment. He started asking about things like interest, late fees and the like and it turned into an hour long phone call. Was I mad?
Not at all.
Customers who actually care about their loan, finances, credit scores and so on made my day. They constantly apologized for chatting my ear off or asking so many questions, but honestly it was a relief to me. I finally found a customer who cared as much about their financial well being as I did.
Now that I have a cell phone bill and I pay my school bill from GCU (I mentioned in a previous post that I live with my parents to save money), I’m much better prepared than going off of just what my parents have told me. From them, I got a great example of how you should pay your bills. But from my job as a bill collector, I got to witness first hand the consequences to not following through with your side of the loan. I have stories about customers for days, and if you guys want to hear them I’m willing to share! XD
But I do hope this post reached someone and they learned something from my previous experiences.