Posts
Brokerage firms attempting to profit from buying bad debt have to consider the consequences as well as the possible benefits of the investment. Often, the more lucrative means of investing in older credit card charge offs is the way to go because a greater percentage can be collected. When a debt collection agency attempts to collect fresh debt, the circumstances surrounding the charge off are still a factor in the debtor's ability to pay, leading to reduced success in debt collection.
A charge off is typically caused by a circumstance that reduces or removes the debtor's ability to pay even a portion of the debt owed the creditor. Lack of employment, sickness, and other difficulties lead to the issuing creditor's inability to recover even a fraction of the bad debt, even though many banks are willing to seek as little as $0.15 on the dollar of the debt owed.
If the issuing creditor, who is close to the fresh debt, cannot collect these funds, how can a debt collector expect to do so? The answer is simple - the debtor won't pay it.
In many cases, it is highly likely that the debtor will file bankruptcy during this early period. Therefore, buying bad debt that has been around for over a year can lead to a greater return on investment for the purchasing firm.
At this point, the original creditor has likely reduced or completely stopped pursuit of bad debt, conserving their resources. Instead, a purchasing firm has a greater opportunity to purchase bad debt portfolios for a smaller percentage of the total debt, with the banks and creditors pleased to simply remove the bad debt from their finances.
At this point, the brokerage firm buying bad debt can more easily pursue debtors for a higher sum, having given the debtor time to recover from whatever occurrence or issue caused them to default on their payments in the first place. After a year to 18 months, the debtor most likely has ironed out a number of issues, including finding employment or recovering from illness, and will be able to pay a greater portion of the debt owed.
On the other hand, a newer charge off is harder to profit from. Early on, banks will demand a greater percentage as payment for the purchase of bad debt portfolios, and pursuing debtors will result in less funds recovered. A brokerage firm can also succeed based on previous attempts at collection, with the debtor growing tired of receiving collection calls from the issuing creditor or perhaps other collection agencies.
Logically speaking, it seems that newer, fresher debt would be easier to pursue and turn a larger profit. However, the issuing creditor may be able to achieve good results, but a brokerage firm buying bad debt will turn a greater profit by investing in older charge offs and debt portfolios.
A charge off is typically caused by a circumstance that reduces or removes the debtor's ability to pay even a portion of the debt owed the creditor. Lack of employment, sickness, and other difficulties lead to the issuing creditor's inability to recover even a fraction of the bad debt, even though many banks are willing to seek as little as $0.15 on the dollar of the debt owed.
If the issuing creditor, who is close to the fresh debt, cannot collect these funds, how can a debt collector expect to do so? The answer is simple - the debtor won't pay it.
In many cases, it is highly likely that the debtor will file bankruptcy during this early period. Therefore, buying bad debt that has been around for over a year can lead to a greater return on investment for the purchasing firm.
At this point, the original creditor has likely reduced or completely stopped pursuit of bad debt, conserving their resources. Instead, a purchasing firm has a greater opportunity to purchase bad debt portfolios for a smaller percentage of the total debt, with the banks and creditors pleased to simply remove the bad debt from their finances.
At this point, the brokerage firm buying bad debt can more easily pursue debtors for a higher sum, having given the debtor time to recover from whatever occurrence or issue caused them to default on their payments in the first place. After a year to 18 months, the debtor most likely has ironed out a number of issues, including finding employment or recovering from illness, and will be able to pay a greater portion of the debt owed.
On the other hand, a newer charge off is harder to profit from. Early on, banks will demand a greater percentage as payment for the purchase of bad debt portfolios, and pursuing debtors will result in less funds recovered. A brokerage firm can also succeed based on previous attempts at collection, with the debtor growing tired of receiving collection calls from the issuing creditor or perhaps other collection agencies.
Logically speaking, it seems that newer, fresher debt would be easier to pursue and turn a larger profit. However, the issuing creditor may be able to achieve good results, but a brokerage firm buying bad debt will turn a greater profit by investing in older charge offs and debt portfolios.
About the Author:
Next, discover more important facts and resources on buying bad debt services, as well as collection agencies solutions.
No comments:
Post a Comment