Debt Resolution

Effective Techniques to Make Loan Recovery Easier

One of the most crucial aspects of the lending business is debt collection or loan recovery. Lenders need to ensure that non-performing assets on their books are as low as possible. Lenders expend considerable resources to ensure that their dues are recovered on time. 

However, overdue payments are an indelible part of lending. That’s why its in the lender’s best interest to develop effective strategies and utilize the latest techniques that ensures that loans are recovered as per the schedule. 

Let’s dive into some of the best ways in which lenders can improve their loan recovery efforts without breaking the bank. 

Automated Payment Reminders 

Payment reminders are one of the first steps that a lender need to inculcate into their debt collection strategy. 

Life is busy for borrowers and it can be quite easy to forget a payment. It is also important to drive home the importance of making the payments on time and keeping it fresh in the minds of borrowers. This ensures that borrowers don’t spend or make any financial decisions that can prevent them from meeting their obligations. 

Fortunately, these days, we have the technological capabilities to completely automate payment reminders for all borrowers. These software tools can be fed the right data about the payment schedules and the amounts to be paid. The tools can then take it from there and communicate payment reminders to borrowers according to the schedule set by the lender. 

These automated reminders can be used across any channel. They can be phone calls, text messages, emails, or app notifications. The key aspect to note here is that the reminders are automated which can greatly reduce the costs associated with the task. 

Flexible Payment Options 

In today’s competitive lending environment, it may be advisable for lenders to be more flexible with their payment schedules. Many borrowers struggle to pay their dues on time. 

As loans can stretch for many years and decades, it can be very hard for borrowers to pay their dues so consistently over such a long period of time. That’s why lenders can implement slightly more flexible payment schedules which can help borrowers meet their payments on time. 

In case a lender does not want to provide flexible payment schedules upfront since it may work to harm the discipline of the borrower, a lender can instead provide flexibility once a borrower expresses that they may default in case the flexibility isn’t provided. The degree of the flexibility can be adjusted and negotiated between the borrower and the lender so that an agreeable schedule can be fixed that works for all parties. 

Negotiating the terms of the flexible payment option can be challenging which is why lender’s can consider having a templated format which the borrower can choose from. 

Data Analytics and Predictive Modeling

Emerging capabilities such as data analytics and predictive modeling can help lenders streamline their collection efforts. Through data analysis, analysts can create a risk profile for all borrowers of a lender. 

This risk profile will be based on all data that a lender has which includes the financial statements and payment history of a borrower. Thanks to this risk profile, it can become easier for debt collection teams to identify high-risk borrowers and take proactive steps to manage their cases in an effort to prevent a default. 

These executives can approach a borrower and discuss their finances with them. They can also help to negotiate new terms for the borrower which can help them make their payments on time. In dire cases, even a moratorium of payments for a few months can also be provided depending on the facts of the case. 

Professional Training for Collection Teams 

Every lender realizes that the role of debt collection agents is hard. A debt collection agent needs to be highly skilled and handle delicate and sensitive negotiations. 

They need to be a people person while also being technically sound. They need to be able to lead the dialogue and persuade borrowers so that they can clearly communicate the lender’s position. And they need to manage numerous cases every day. 

That’s why its essential for lenders to help debt collection agents as much as possible. The first and most important way to do that is to provide proper formalized training that agents can use when working in the field. This professional training can go a long way to ensure that agents have the necessary tools to be able to handle cases in the best way possible. 

Omnichannel Contact Strategy 

Earlier, lenders used to rely on letters and in-person visits to homes and offices as the primary means of communication with the borrower. However, lenders can now use a vast variety of communication channels to better reach borrowers and ensure that the message has been communicated. 

Different channels can be used for different purposes. For example, text messages can be used as payment reminders while in-person visits can be used for negotiations and settlements. This type of omnichannel strategy can ensure that a lender leverages every communication channel i the best way possible. 

Why Choose Legodesk?

Legodesk is proud to offer an all-in-one software platform that has been specially designed for debt collection. 

Our software platform has several innovative features such as contact management, case management, legal notice automation, and the Feet-on-Street app which can help debt collection agents perform more efficiently and more effectively. 

Legodesk is trusted by institutional lenders such as banks and NBFCs as well as by enterprises who have a collection arm for overdue payments. 

Wrapping Up  

While loan recovery can be fraught with difficulties, leveraging the best techniques can help lenders reduce the non-performing assets on their books. 

Even marginal gains can have a big impact and be highly cost-effective. Lenders should implement systems that are scalable across the entire debt collection effort and can be standardized for all borrowers. The personal touch can be added to cases that require a more nuanced approach as well. 

Overall, these techniques can help lenders improve their bottom line and reduce costs related to debt collection. 

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by ashish padhy

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