Debt Collection Facts Important To Your Business
8:41 AM
No matter what your business is or what its size is, at some point or another debt collection will become an issue for you. Following are the basics of debt collection so you can find out what you need to know in order to decide whether to handle it yourself or if you need a collection agency to help you.
The first thing you need to know is that some collection agencies will actually buy debt from you. This means they pay you an agreed-upon percentage of what's owed you, and then they own the rights to whatever money they get back from the debtor. If you need some of your money back right away this may be the way to go regarding debt collection. Another option is to let them take a percentage of the money after they collect it. Either way, you don't have to outlay money up front so it's favorable to you to hire a collection agency.
The first step an agency will take is to send a letter on your behalf informing the debtor of the money owed and giving them 30 days to dispute the facts regarding the case. Most debtors do not respond to these letters, at which point the collection agency starts calling them.
The next step is for the agency to report the debt to credit bureaus. Often making this threat to consumers is enough to cause them to pay the debt back because they don't want their credit score ruined. However, if the threat isn't motivation enough to get them to pay, you should still follow through on it because debtors who want to buy property or get some other kind of loan down the road will sometimes contact you and try to negotiate settling the debt in order to get you to agree to remove if from their credit report.
The next step a collection agency might take is to hire a private investigator or use private investigation software in order to locate the debtor if they're having trouble getting him or her on the phone. If you're not using an agency, you can do this yourself with websites like Net Detective or Intellius.
As long as you have a previous address for the person and they have a phone number associated with one of the previous addresses, the software can find them. This is important because it cuts down on the debtor's ability to avoid collections calls, and also because when they realize they can't hide from you it's often scary enough to make them want to pay.
The next step in debt collection is to attempt to negotiate an agreement. Debt collectors will first demand payment in full but if the debtor just can't afford that, their next step will be to get them to agree to a repayment plan or a partial lump payment. You can do this for yourself as well.
There's a lot to be said for getting a partial settlement right away, because the more time goes on the less likely it is that you will recover the debt. However, if you work out a payment plan you'll also make more money on interest over time, so this is a perfectly legitimate resolution to debt collection problems as well. Either way, using debt collection techniques that debt collectors use will help you get more of your money back.
The first thing you need to know is that some collection agencies will actually buy debt from you. This means they pay you an agreed-upon percentage of what's owed you, and then they own the rights to whatever money they get back from the debtor. If you need some of your money back right away this may be the way to go regarding debt collection. Another option is to let them take a percentage of the money after they collect it. Either way, you don't have to outlay money up front so it's favorable to you to hire a collection agency.
The first step an agency will take is to send a letter on your behalf informing the debtor of the money owed and giving them 30 days to dispute the facts regarding the case. Most debtors do not respond to these letters, at which point the collection agency starts calling them.
The next step is for the agency to report the debt to credit bureaus. Often making this threat to consumers is enough to cause them to pay the debt back because they don't want their credit score ruined. However, if the threat isn't motivation enough to get them to pay, you should still follow through on it because debtors who want to buy property or get some other kind of loan down the road will sometimes contact you and try to negotiate settling the debt in order to get you to agree to remove if from their credit report.
The next step a collection agency might take is to hire a private investigator or use private investigation software in order to locate the debtor if they're having trouble getting him or her on the phone. If you're not using an agency, you can do this yourself with websites like Net Detective or Intellius.
As long as you have a previous address for the person and they have a phone number associated with one of the previous addresses, the software can find them. This is important because it cuts down on the debtor's ability to avoid collections calls, and also because when they realize they can't hide from you it's often scary enough to make them want to pay.
The next step in debt collection is to attempt to negotiate an agreement. Debt collectors will first demand payment in full but if the debtor just can't afford that, their next step will be to get them to agree to a repayment plan or a partial lump payment. You can do this for yourself as well.
There's a lot to be said for getting a partial settlement right away, because the more time goes on the less likely it is that you will recover the debt. However, if you work out a payment plan you'll also make more money on interest over time, so this is a perfectly legitimate resolution to debt collection problems as well. Either way, using debt collection techniques that debt collectors use will help you get more of your money back.
About the Author:
David P. Montana has thirty years experience as an industry professional, business consultant and published author in collection agency services. David offers more beneficial tips and information about national debt collection services.
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