10 Ways to Improve Your Loan Collections Process
August 5, 2016
One of the most important aspects of a payday loan company is being able to collect money from borrowers. A smart lending company will want to do everything they can to avoid defaulted loans so they don't go out of business. There are some things a lending company can do to increase their chances of getting the loans they provide paid back. Here are 10 things that can be done to have the best chance of retrieving funds from a payday loan:
- Offering incentives to customers who pay their loans back early will help them actually make their payments. If a borrower knows they will get a certain percentage off of their interest rate by paying their loan back 30 days early, they are more likely to do it.
- Emailing the debtors. If someone knows they have a defaulted loan, they may avoid telephone calls. However, to delete an email the customer will have to see that you've reached out to them and, depending on their provider, see either a preview or all of the message. People are often more likely to read the information in an email if they're avoiding phone calls because they do not feel pressured, or like they are defending themselves.
- Make use of bill collection technology. A lending company can pay for an automated service to call or text debtors and remind them of their past-due payment.
- Handwrite the envelopes for collection letters and keep them short and sweet. People are more apt to open letters that seem to have come from an actual person and keep the information simple and easy to read.
- Stick to the facts. When writing a letter or an email to a client that's past-due, simply remind them of their payment and ask for the money.
- Elaborating on how a lack of payment can affect the client. While it's not a good idea to make threats, stating what can happen as a result of non-payment is acceptable.
- Only offer loans to those with good credit scores. The best way to ensure a client is going to pay the money back is to check their past history.
- Have the business' most experienced loan agents make calls to past-due clients. They will pose a higher risk of default and a more experienced agent may be able to spot signs and false excuses that a newer employee would miss.
- Communicate with customers as efficiently as possible. When rejecting someone's request for a loan increase, stating the reason why or counter proposing are important.
- When possible, gather information about a borrower's previous loan payment history. Some people borrow from the same company twice, and some of them switch to other companies because they have a bad track record.
Using the Right Software
It's important that a payday loan company keep track of all their loans and when they are supposed to be repaid. There are excellent payday loan software programs that can help a lending agency keep track of everything as efficiently as possible and offer robust automation tools for collections reminders and communication. This is essential and speeds up collections by allowing a lender to take immediate, automated action if a borrower is late on repaying their loan.