Why Should You Think About Debt Consolidation Prior To Filing Bankruptcy?
Whitepapers
August 06 2009
If your intolerable debt burden is giving you harrowing times, you should think about
debt consolidation. For many people, debt consolidation is a preferable option to filing for bankruptcy. However, you should remember that you would require collateral while asking for a debt consolidation loan. The amount of the collateral would be dependent on the amount that you want to borrow. When you have been accepted for a debt consolidation loan, all your unpaid loans would be merged into one. Your monthly payments for these debts would also be merged into one payment with a reduced interest rate instead of multiple payments with high interest rates. The debt consolidator subsequently allocates this payment among all your creditors.
A comprehensive, quantitative survey on the small payments market was released today at the Third Annual Micro and Small Payments Conference in New York City. The survey found consumers' desire to use credit and debit cards for small payments and micropayments at the point of sale and online is on the rise. An estimated 45 million Americans are willing to use credit or debit cards for purchases of $5 or less, up 23 percent from September 2004. Additionally, nearly 20 million Americans ages 12 and older have purchased something online for l ess than $2 in the past year, up nearly 29 percent from September 2004 and 350 percent from October 2003.
For every business serious about maintaining optimum cash flow, it is imperative that effective practices be implemented for securing monies owed and curtailing potential debtors. The past several years have seen some troublesome statistics materialize with respect to business debt collection. The statistics are particularly upsetting for small and medium-sized businesses trying to collect on their invoices. Consider these figures:
According to collection industry research, the average delay for a due payment is 55 days for big businesses and 66 days for small businesses.
Just 10% to15% of small businesses insist that their terms of payment be met and also rely on third parties such as collection agencies and litigators to address outstanding receivables.
The greater the size of the debt owed, the lower the percentage of likelihood that the debt will be collected.
In all instances, the likelihood of successful debt recovery is increased dramatically when the process is outsourced to a reputable, third party credit management firm. In fact, today, it is estimated that over 90% of big businesses and approximately 10% of small businesses rely on professional debt collection agencies, with middle-market businesses falling in the middle. These companies are already benefiting from third-party intervention. For those businesses that have yet to be sold on the benefits of outsourcing their receivables management and collection processes, it is important to gain greater insight into how to avoid potential problems and implement best practices for credit management.
Utilities that understanding their cost to collect and develop an agile prioritized collection process have a competitive edge.
By Karl Boone and Ian Roberts
Utilities with multi-million dollar billing revenues on average take 45-50 days to collect and the cost of collecting the revenue is in some cases higher than the cash received. Although the write-off levels can be regarded as normal, some of the debt can take much longer to collect. In order to reduce the overall level of debt and age of debt, and therefore the cost of working capital, utilities must understand the cost to collect at a detailed level for all customer types and introduce agility into the process to manage the costs down and encourage quicker payment.
Utilities should aim to understand (and minimize) the cost of all the processes that contribute to collecting revenue at each stage of the debt collection process from bill to cash. The customer base should be segmented and the profitability of each segment understood so that less profitable customers can be identified and the debt collection process changed accordingly for that segment.
This extract is from the research report Best Practice in Consumer Collection, written by Astrid Rial and published by the global financial services information provider, VRL Publishing. The Spanish language edition of this report was kindly sponsored by Visa.
Consumer credit lending boom
Consumer spending is at an all-time high around the world. Competition and increased availability of additional credit mean that more consumers than ever before are able to purchase goods and services and finance them without having to pay for their entire cost in a lump sum. With the dramatic improvement in the reliability and availability of consumer information and technology, consumer credit, which was once only available to the privileged few, is now being offered to consumers at all income levels. Creditors are able to make sound lending decisions quickly and even the low-income, the risky or consumers with no previous credit history are able to obtain credit cards and loans.
A survey released today by Bankrate.com that shows banks are boosting their fees faster than the interest rates they are offering customers illustrates why banks should not be allowed to broker real estate, the president of the National Association of Realtors said today.
"Banks have once again demonstrated their incredible ability to find ways to charge customers record fees. Banks that once touted warm, fuzzy customer relations now are brazenly charging nearly $3 to use an ATM and more than $26 for a bounced check. Imagine what they will do to the real estate customer if they are allowed to broker real estate. Banks will control the real estate transaction end-to-end, creating virtually unlimited opportunities for extra charges and add-ons," said NAR President Thomas M. Stevens of Vienna, Va.
A survey finds that if improved, even insufficient understanding of and access to credit scores can save consumers billions of dollars. So it's good news that the second annual consumer credit score survey commissioned by the Consumer Federation of America and Providian Financial found that credit understanding by consumers has improved.
"In the past year, consumer understanding of these scores has improved, in part, because many consumers have obtained their scores," said CFA executive director Stephen Brobeck. "Unfortunately, most consumers still do not know basic facts about credit scores and their financial significance."
Time is money, and there are few areas in your business where that is more evident than when collecting your company’s cash by Darin Ball
When most people think of the collection efforts of the credit/collection department, they think in terms of the relationship between the collector and the customer. The responsibility of the department is, after all, to protect the accounts receivable investment by reducing risk through credit management, as well as collecting outstanding invoices from delinquent customers. Needless to say, in order to have a truly successful credit/collection department, you must ensure that customers pay
within terms.
Does your Collections & Recovery process leverage any form of " Behavior or Collectability Score" to determine who to target your recovery efforts on?3855 votes
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