How banks collect on their bad debts
Posted on 20 mar 2019
The idea of defaulting on a loan fills even the most stoic of us with dread. Owing money we don’t have, having debt collectors calling/knocking/emailing and the inevitable blemish it will leave on our credit rating; is it any wonder that people tend to busy their heads in the sand when it comes to taking care of a bad debt.
So, let’s walk through the reality of the situation. If you did default on a loan enough times that the debt is labelled “bad”, the bank or lending institution would do everything in their power to get that money back from you. If they are unsuccessful in their efforts, what tends to happen is the debt gets “sold” to a debt collection agency who then take up the pursuit for the “lost” money.
A debt collection agency’s only job is to chase bad debts and do what they can to collect that money. They will often start with mail contact and escalate to phone calls, sometimes multiple times a day. They operate under a “squeak wheel” proviso; eventually, the person owing the money will feel the pressure of the agency and agree to pay off the money owed but as we mentioned before, many people will tend to run from such tactics out of fear of the unknown. What if we told you that this process was not only avoidable, but that sometimes answering the first call from the bank is often the best thing you can do?
Owing money is not a bad thing. We all run into trouble sometimes and at the end of the day, the bank just wants to see that you are making the effort to repay the loan. It is in their best interest to keep you as a customer and as such, banks are often open to things like repayment plans or agreements to pay the amount back over a period of time. In some cases, the bank will work with you by lowering your interest rate (if you qualify) or reducing your loan amount.
It sounds intimidating and complicated and if you are not familiar with who to call or what to say, it can seem like an insurmountable problem and one that is easier to ignore than deal with, but bad debt doesn’t need to be scary; you just need the right people in your corner.
Contacting a financial negotiator can help take the stress, headache and worry out of bad debt. A financial negotiator is well versed in how to deal with lenders on your behalf. They know who to contact, they know what to ask for and they know how to advocate for their clients. More often than not, a good financial negotiator can accomplish the best possible outcome for you and allow you to get your debt paid off in a way that works for both you and the bank. This can save so much hassle down the line and can preserve the relationship between you and your bank.
If debt is overwhelming you and you don’t know where to turn, a phone call to Credit Mediation Services to find out what options are available to you would be a beneficial move. With years of experience in the industry and having helped so many people out of scary debt situations, our team is confident we can help you turn your debt nightmares into a distant memory.