How to buy debt portfolios as a new investor?
Debt portfolios consist of individual defaulted loans of consumer or commercial borrowers that are sold to debt buyers. Furthermore, they are placed out to third-party agencies to collect on for a percentage. The practice of buying a debt portfolio is often cheap and lucrative. However, this practice contains risks, so you need to take a lot of care before buying it. The industry of debt is a sane industry where your position depends upon your placement network.
So, before buying debt, ensure that you buy from a reliable seller and place it with a well-rounded agency who can liquidate the debt,
so you aren?t going to get hosed on your investment.
You should ask the seller about:
Type of debt
Agency level
How long the file has been shelved
Chain of title ( ask to review after you sign an NDA and offer an LOI to purchase )
Previous collect tactics
Copies of the signed contract or check and the billing statement
Things to look for and analyze in the masked data file
- Original account numbers
- Original loan amount
- Overall average account balance
- Original loan date
- Last payment date
- Charge off date
- Debtor States
- Zipcodes
An unmasked file including the above data:
- Social Security Numbers
- Date of Birth
- Phone Numbers
- Addresses
- Ref Name
- Ref Numbers
- Ref Address
- Employer
- Media ( copies of the signed contract ) or check or billing statement
The most important step is to do complete research. Although it appears to be a full-proof investment. There are lots of traps going on in the market place. So, you need to be aware of the disruptive rogue brokers and collection agencies. Luckily, the industry has developed a blacklist for such offenders who can be located on Facebook debt collection groups.
If you are a noob in the business of buying debt, start purchasing with a small amount as little as $3000 which is offered by some verified sellers. However, the portfolios between $5000 and $100k are readily available. Your only aim should be to gain maximum profit so that you can buy larger portfolios as you grow. If you are successful in buying the debt at the right price with the good collection network and strategy then ? wash and repeat. Remember that you won?t be able to collect from all the debtors. In some cases, the debt portfolios provide a little profit for the purchasers of debt if they don?t buy it at the right price. Also, not all portfolios are the same, some liquidate better than others even know they look alike and come from the same carve out of the portfolio. It?s a risky business even if you are in the right networks of agencies and following the right collection strategy. Debt buying is more in less a matching game.
Jeffery Hartman | Credit & Debt Collection ? Direct Lender Relations- Managing Partner ? Board Member ? Debt Collections Consultant
