Segmentation Makes Loan Collections Strategies More Effective

Written by Super User. Posted in Managing Money

Segmentation Makes Loan Collections Strategies More Effective

One method used to implement successful collections strategies is client segmentation. Not all clients are the same, nor are their reasons for delinquency. Effective client segmentation results primarily from identifying the cause of delinquency and classifying the client based on attitude, capacity to pay, solvency and location.

Effective client segmentation is not achieved early on; classification is a difficult task, which is why it is important to follow up with clients and monitor the number of days any client falls past-due. As the number of past-due days increases, strategies should change as the lender and collections agents come to know the client better. At the beginning the focus is on retaining the client, but as the number of days past-due increases the focus changes to recovering the loaned funds.

Develop Well-Defined Strategies for Collections of Delinquent Loans

Written by Super User. Posted in Managing Money

Develop Well-Defined Strategies for Collections of Delinquent Loans

Developing a strong collections unit requires clearly defined, documented and consistent policies and procedures that guide staff through the collections process and instruct them on how to respond in particular situations. Such policies and procedures should include a variety of strategies.

Establish Client-Contact Policies

When should the bank make initial contact? Is the best way to contact the client through telephone, email, printed letter or visits? The key to selecting the best method is weighing the costs and benefits of each available method based on number of days past-due and the probability of total debt collections. Contact policies may include preventative strategies, such as a payment reminder, and should include a plan defining dates of future contact and the steps to be taken in the collections process.

Gather and Manage Quality Information for Effective Loan Recovery

Written by Super User. Posted in Managing Money

Gather and Manage Quality Information for Effective Loan Recovery

The precise and opportune information about the delinquent clients, loan situation and important information that bring feedback about the credit cycle is relevant for the successful on collections

Develop Efficient Information and Support Systems

To properly analyze collections activities, it is necessary for the institution to have in place an efficient information system to facilitate the monitoring of past-due clients and the production of clear and precise reports. Generally there are three kinds of reports:

Improving Effectiveness of the Loan Collections Process

Written by Super User. Posted in Managing Money

Improving Effectiveness of the Loan Collections Process

It could be said that a collections department is only as good as the staff working in it. A well-designed collections strategy weighs the strengths and weaknesses of the institution, addressing general questions such as whether collections should be handled internally or externally through a third party as well as considering what measures should be in place to ensure staff are properly trained, motivated, and measured. Also, it can promote healthy competition among the collections team.

Adopt Proactive Strategies to Check Loan Delinquency Before it Starts

Written by Super User. Posted in Managing Money

Adopt Proactive Strategies to Check Loan Delinquency Before it Starts

Addressing the problem before there is a problem proves to be one of the most effective strategies available in reducing delinquency. Preventive action is less costly, and the best collections activities are those that manage clients who are not yet past due carefully. There are a number of proactive strategies that a lender may employ in the management of those clients before their loans are due.

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