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The Unsung Heroes of Unsecured Personal Loans: Bill Collectors

[Mar 11, 2010.]


Consumers who make use of unsecured personal loans may not have the best perception of bill collectors. Especially for people who have taken out high interest bad credit personal loans, it's easy to view bill collectors as a pack of worthless parasites who have no redeeming value whatsoever.

However, the reality is, without bill collectors, there would be no way that unsecured personal loans would be available, let alone bad credit unsecured personal loans, let alone unsecured personal loans that have relatively low fixed interest rates and manageable repayment schedules.

Unsecured Personal Loans Are a Pure Numbers Game

In order to understand how important bill collectors are to the food chain of unsecured bad credit personal loans, it is essential to realize that the decision whether or not to offer this high risk brand of credit is entirely dependent on the data that banks and lenders collect regarding two main factors:

  • The default rate of personal loans

  • The settlement rate after personal loans have defaulted

Bill collectors make a direct impact on both of those all-important numbers. Because of this, bill collectors make a direct impact on the decision-making of lenders who make these high risk loans.

Without bill collectors to track people down and make sure repayment rates are decent, even after defaults, there can be no doubt that unsecured personal credit would be extremely hard to come by, and possibly impossible for the bad credit borrower.

Bill Collectors and the "New Normal" of Pretty Much Everyone Drowning In Debt

One of the most popular reasons for taking out an unsecured personal loan is to consolidate high interest credit card debts into one monthly payment. Meanwhile, millions of Americans are simply in too far over their heads to address their debt problems in any comprehensive way. Bankruptcies happen.

In this environment, the behavior of bill collectors has, for the most part, been adjusted. Of course there are still those bill collectors who think they're Don Corleone, but there is also a softer approach that many bill collectors apply to good effect.

For example, collection agencies that are contracted by credit card companies and personal lenders may be given increased ability to negotiate debts in order to settle them once and for all. Bill collectors may be authorized in such cases to reduce debt amounts in return for immediate payment of a portion of the debt.

This "room for negotiation" reality is certainly something to keep in mind when dealing with today's breed of bill collector.


About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.

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