Four Tips To Creating A Successful Debt Purchasing Company
If you're an entrepreneur or you've already ventured out into the investor world to sink your toes in the sands of debt purchasing, you certainly want to be in it for the long haul and make the most you can. Fortunately, if you know what you're doing and follow these four tips, you can create a stable debt purchasing biz that will sail you to the shores of success.
1. Know How to Negotiate
When going after people who owe money, it's easy to think of them as a number. Especially the number they owe. And when that number is big and they get upset when you call, it's easy to get pulled into their emotional turmoil.
But successful companies seem to have this thing in the bag. As in, they understand that knowing how to negotiate with debtors is a big piece of the puzzle.
According to Todd Gough, one of the founders of an exploding debt-purchasing company, one of their secrets is how they handle consumers. They don't threaten or raise their voices. The key is to get debtors to enter into a payment plan willingly, without coercion.
It works because debtors are more likely to follow through with a payment plan when it's something they've agreed to, not something they've been bullied into.
And many people just want someone who's willing to listen, someone who actually cares, or at least acts like they do.
Often they've hit rocky financial times through the loss of a job or an illness. When they feel as though the representative who's calling them isn't just another "rep" but rather someone who cares about why they haven't made a payment (even if it doesn't really matter why) they're less likely to hang up and run off without paying.
Also, it's much easier for the debtor to make a decision about what they can reasonably afford to pay each month when they're in a positive emotional state.
2. Be Patient
Another trick to keeping your business afloat is to remember that you're in it for the long haul.
Many agencies and corporations who purchase debt often give up after a year of two of not being able to collect from the debtor.
So maybe this is where you come into the picture. You buy the debt with the realization that no one's financial status stays the same forever. People lose jobs and they become sick or injured. But these are usually temporary problems. In other words, if you can be patient and wait it out—say four to five years—the debtor will be in a better financial position to pay off the debt.
Not only that, but once you contact them, more than likely they've felt the sting of bad credit for some time, and they're ready and willing to begin making payments to get that monkey off their backs and improve their credit score.
3. Find the Best Debts At the Best Price
Knowing where to look and what to look for is part of the plan. But finding debts at the lowest rates with the highest chance of return is where you want to steer your ship.
You already know that no matter what you spend on a debt portfolio, the debtor still owes the original loan amount. Suppose you buy a $10,000 debt at 10 cents on the dollar for $1,000. And suppose the debtor agrees to make 20 payments of $500, not factoring in interest and collection fees, of course. If the debtor makes only three payments, you've already netted $500.
For a real life example, in 1996, this successful company purchased a $10,229 loan for $3,080, ultimately collecting $10,194, giving them a 332% return on the initial investment or purchase price. Not bad for a company that was still fairly young at the time.
4. Stick With Many Smaller Debts
It's almost common sense but something that's easy to forget, especially when you want to be a shark going after the big fish and not just the guppies. But consider that it's much easier for most people—whether they have families or they're single—to pay off a smaller loan than a larger one. That's probably why Gough tends to purchase debts that are less than $5,000.
If you have two or three huge debts you're banking on, you've simply got too much to lose if they don't pay. But when your potential income is spread out among hundreds of different baskets, it's not so bad if you don't collect the full amount from every single one of your debtors.
On the flip side, if you own a business that needs to sell its debt, then consider visiting this debt purchasing company at http://www.vioninv.com/.