What to do When Debtors Can't Pay

In today’s world, the vast majority of consumers have more debt than they can realistically handle. Many of these debtors, try as they might, cannot find a way to live beneath their means. They often rely heavily on credit cards and other high-interest financing options to pay their required bills. And, while such options may provide a short-term “solution,” they eventually lead to even more bills and more debt, continuing the vicious cycle of non-payment.   

Many third party collection agencies find that, when they call to talk about a client’s account, the client says he can’t pay the bill…and is telling the truth. So many consumers are just so deep in debt that they feel like they have no options. That is where a debt collector can step in and help the debtor to find potential options to pay off his debt. One of the best of those options is online peer to peer lending.

Online peer to peer lending is a vastly growing enterprise, one that earned about $5 billion in loans in the past year alone. And, while there are many peer to peer lending platforms, two of the best and most widely used are Lending club and Prosper, both of which offer loans up to $35,000 with three to five year repayment terms. The interest rates also tend to be quite low, making these online loans a viable and convenient option for consumers who want to pay off their debts with one big payment and then just focus on repaying a single loan, which most find much easier and more convenient than paying several bills at different times each month.

Such loans are not just useful for paying for debts either. Some peer to peer platforms offer loans for mortgages, student loans, and more. Debt collectors, however, don’t necessarily want to encourage people to take out more debt, though they may want to consider mentioning peer to peer loans as a viable option for paying off current debts, especially since such loans have so many advantages.

Some of the advantages of such loans that debt collectors may want to share with debtors include:

·         Fixed interest rates

·         Longer time to repay the loans (3 to 5 years, as mentioned above, is average)

·         No pre-payment penalties

·         Easily, quick, fully online application process

·         Automatic deductions for payments

·         Assets are protected

If a client becomes interested in one of these loans, his next question tends to be whether or not he is eligible. Fortunately, there are very few requirements that must be met in order to qualify for a loan from a peer to peer site. Debt collectors can inform clients that the general requirements include:

·         Being a United States citizen or permanent resident

·         Being 18 years of age or older

·         Having a FICO score of at least 600

·         A debt to income ratio below 35%, mortgage not included

·         At least three years of credit history with no current delinquencies or recent bankruptcies

·         Six or fewer credit inquiries over the last six months

·         Two current revolving credit accounts

Meeting each of these requirements is not a guarantee of approval, so debt collectors should not make any absolute statements or promises to consumers, but they can inform them of this option in hopes that the debtor will qualify for such a loan and use the money received to pay off debts.