Going after debt is like playing good cop, bad cop; you never know which stand to take. You desperately need to get your funds from this client but at the same time you really don’t want to destroy the relationship you have.
People always have this idea that debt collections have to be nasty and messy but I can tell you for free that it doesn’t have to be. There are ways to persuade your debtors to pay without necessarily going the bad cop way.
However, it is important that you exercise extra caution in handing out credits or lending money to people. Ensure that you only extend this privilege to people who are creditworthy and whom you trust to make good their promise of repayment. You would be able to avoid a lot of issues that way. Here are fifteen ways to persuade your Debtors to pay-:
15 Highly Effective Ways to Persuade Debtors to Pay
Table of Content
- 1. Charge interests on late account
- 2. Ensure that loans and debts are guaranteed
- 3. Allow customers to choose repayment plans
- 4. Understand the position of the law on debt collection
- 5. Set a deadline
- 6. Send reminders
- 7. Call at the right time
- 8. Keep your attitude in check
- 9. Offer your debtors deals
- 10. Accept installments
- 11. Be persistent but patient
- 12. Hire a professional
- 13. Threaten to inform credit bureaus
- 14. Accept Assets in place of cash
- 15. File a lawsuit
1. Charge interests on late account
First, you have to do your best to discourage customers from late payments. You can encourage your customers to pay their debts early by charging interests on late payments. Debtors would always try to prevent accumulating more debts through interests and so would want to settle their bills on time.
2. Ensure that loans and debts are guaranteed
Before you offer anyone loans or credits, you must ensure that they have a third party who would guarantee the debt and offer to pay back when the debtor can’t. This would be very helpful in ensuring that your funds are safe whenever you loan out money. If the client isn’t going to pay, the guarantor will; either way, you will get your money back.
3. Allow customers to choose repayment plans
You can also encourage your customers to pay off their debts in a timely manner by allowing them choose the most suitable payment options for them. You can offer them two or three different options and allow them select the most convenient option for them.
4. Understand the position of the law on debt collection
There are various laws guiding debt collection procedures in different countries. So you have to find out what the law says about debt collection in your own country before you set out, so that you can avoid doing anything that would land you in trouble.
5. Set a deadline
You have to decide on a time deadline for repayment and you would only begin to pursue your debtors for a repayment after this time lapses.
6. Send reminders
When the deadline set for repayment has lapsed, you can start with sending polite reminders to your debtors to remind them of their obligation to pay. You may need to send several reminders in which your language would get increasingly stern but polite nevertheless.
7. Call at the right time
If you have access to the person’s phone number, which you should, you can call them up to demand payments but you should ensure that you call at the right time when the person would be available to pick your call. You could also leave voice messages if you are finding it hard to reach a debtor on phone.
8. Keep your attitude in check
Being rude and nasty to debtors is a very unprofessional way to go about debt collection. You do not have to take anything personal; just keep doing your best to appeal to the debtor to pay up and in the end, if all the methods you try fail to produce results, involve your lawyer.
9. Offer your debtors deals
Debt collection needs a carrot-stick kind of approach. You can persuade your debtors to pay off their debts by offering them deals. You could offer to waive off a certain percentage of the debt or offer some kind of incentives which would encourage them to pay off the debts.
10. Accept installments
Another way to encourage your debtors to pay is to accept installments which would make it easier for your debtors to pay in case of debtors who are cash-strapped or going through financial difficulties.
11. Be persistent but patient
While you need to be persistent about collecting your debts, you also need to be patient with your debtors. People have different reasons why they are unable to meet up with their debt repayment obligations and until you are sure that you are dealing with a chronic, unrepentant debtor, it would be better to be a little more patient.
12. Hire a professional
You could also consider hiring a debt collection consultant. Debt collection consultants possess the necessary knowledge and experience to help you collect your funds. By hiring a professional, you wouldn’t necessarily have to get involved in the debt collection procedure although you may have to lose some percentage of the debt collected to the consultant as payment for his services.
13. Threaten to inform credit bureaus
Everyone knows the importance of keeping a clean credit record so as to maintain a good credit. A poor credit rating is not something anyone would want to have on their hands because it can stand in the way of so many things in future.
A poor credit score may make it impossible for a person to get loans or mortgage or even business investors; so if you have a debtor who is unresponsive and appears unwilling to pay off his debts, just threaten to report to credit bureaus and you just might start to receive some response.
14. Accept Assets in place of cash
You could also allow your customers settle their debts through assets when they are unable to pay cash. A debtor might not be able to afford cash but may have something worth the amount owed to you. Most debtors would not readily offer you their assets in exchange of debts but you could encourage them to do so by letting them know that you would be willing to accept assets instead of cash.
15. File a lawsuit
This is the last step you should consider when all the strategies you have tried have failed to produce desired results.