Buying Bad Debt: Large Profit Potential For Investors

Getting into the debt collection market has huge profit potential, especially when the country is overwhelmed with bad debt. There are many types of bad debt out there that can be bought for a margin of the actual bill. Imagine paying 10-cents on the dollar for credit card charge accounts and then being able to collect the debt for a huge profit.
Credit card companies are the most common place to purchase bad debt from. Accounts that become more than six months delinquent are often written off by the company. To collect a small margin of the debt by selling it to a buyer allows them to recover some of the loss, while giving the buyer the opportunity to collect themselves. As a buyer of bad debt one has the option of trying to collect the total amount due or to work out a settlement offer with the debtor.
While credit cards may be the most common place to find accounts to buy, they are certainly not the only place. Student loans, ambulance services and installment contracts that are delinquent can all be profit opportunities as well. The key to buying these accounts is establishing a business relationship with various credit departments. Rather than allowing these places to send them to normal collection agencies, they need to be aware that they can sell them and recover some loss before sending them out to private collection agencies that may or may not collect and pay them.

When buying bad debt looking for large accounts is best. Small debt will not be profitable and collecting it is actually more difficult than larger accounts. People are willing to leave a small outstanding bill unpaid, while a large sum of money is more profitable for them to work out a deal on. Also, taking note of how many collection agencies, if any, it has been sent to is important. An account that has made its rounds with a few agencies already, will probably not pan out and buying it will be pointless. Some companies will sell an entire portfolio of bad debt as this is the quickest way to get numerous accounts at once. Knowing the facts about the portfolio before buying includes finding out the average balance of each account, how long ago the last payments were made, how many accounts are included and if all the documentation is available. Knowing what to buy, how much and when to buy it is the key to making money in bad debt recovery.

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