Starting a business usually requires taking a loan or two as the capital required for the venture is generally insufficient with savings alone. Even aspiring entrepreneurs with millions to their name need to borrow to mitigate losses in the first several years of operation. Running a business is all about being financially savvy.
But any doubt in borrowing capital is understandable since business owners try to avoid bankruptcy. In a fluid business climate, anything can change in an instant, so having funds on hand serves as a failsafe. Nevertheless, an owner may still face enormous debt no matter what their financial capability may be.
Settling your Debt
If creditors determine that tallied accounts are uncollectable, it would be taken care of by a debt collector. For an amount that’s around half of the total debt, this service would take the charges off the creditors’ hands. While collectors typically deal with personal debt, they also handle business debt like small business loans and equipment financing.
The decision to sell debt, however, shouldn’t be taken lightly. Despite its legitimacy, the process has always been under intense scrutiny from both the government and the public because of reported malpractices. Keep in mind the following points before deciding to do so:
PRO: Tracking Debtors is Easy
Creditors barely have the time and resources to pursue hard-to-collect debts, which is why they sell them to debt collectors. Once they confirm the debt, the collectors will contact the debtors on their creditors’ behalf and urge them to settle it as soon as possible. In most cases, it’s hard for debtors to get away from collectors.
Utilizing tracking programs like Microbilt’s skip tracing tools makes collectors’ work more efficient. They help uncover an individual’s contact and other important details—everything from their previous and current location to their history of financial transactions. The information goes a long way in coordinating with the debtor about settling the dues in a peaceful manner.
CON: Privilege is Prone to Abuse
As mentioned earlier, selling debt has been under scrutiny due to reports of some collectors abusing their privileges. It doesn’t take a quick internet search to see stories of never-ending calls harassing individuals, sometimes even threatening them. Given all the information collectors have access to, they must all the more exercise utmost discipline. For instance, using an adress search program should only be limited to getting a debtor’s previous and current addresses, among other pertinent information.
Most complaints to the Federal Trade Commission are about such ill practices which create inconvenience for the parties involved. By no means must it serve as a front for further harassment.
PRO: Negotiations are More Convenient
Negotiating a fast and convenient settlement of debts is well within the debt collector’s expertise. When creditors hand the debt over to the collector, they’re also giving the privilege of pursuing it. Provided a clear language about forwarding debt in the Terms of Service (ToS), a creditor mostly won’t have to get involved in the process.
Depending on the individual or business’s situation, negotiations can save them from resorting to more severe measures like filing for bankruptcy. It’s important to note that bankruptcy can severely impact credit scores and affect one’s ability to take out loans in the future. Of course, selling debt is already not ideal, but it doesn’t have to be worse.
CON: Souring Relationships may Happen
Regardless, knowing that the collector now has the debt can embitter the relationship between the creditor and debtor. Most people would prefer to settle outstanding dues with their own power, as getting a third party involved gives the impression of a worsening situation. Creditors can insist that they can, as stated in the ToS, but it will not improve their standing with the debtors.
Collectors don’t have a say in matters outside collecting delinquent debts. However, how they perform their jobs reflects significantly on a creditor. Selling debt to a collector with aggressive—if not questionable—practices say a lot about how the creditor prefers to do business.
No matter what the circumstance may be, selling debt will sometimes be inevitable. From a creditor’s perspective, trying to settle the matter in-house can help maintain integrity and rapport with debtors. At the same time, it should also make the terms about forwarding delinquencies to debt collectors clearer and easier.
When things get out of hand, choosing a reputable collector should be the main priority. Always push for a fast and convenient method of settling debts so that everything will be taken into account accordingly.