Have you lent money to someone? If so, there is a significant chance that its collection is proving to be quite a hassle for you.

According to a report published by Experian, consumer debt reached a new high in 2019, with a total of 14 trillion USD. And with the rise of debt, there has also been an increase in delinquency, which has risen to 4.8 percent, as per a report by the New York Fed.

While you can collect the debt from your borrowers yourself, it is much more advisable to hire a debt collection agency for the task. Here is why.


Giving out debt has its pros and cons. While some may view it as an unfavorable financial instrument, if your after-tax cost of debt is lower than the total premium plus interest you receive, it means that you are earning money.

A debt collection agency help reduce the cost of debt. If you operate alone, you will have to bear the legal costs and other similar fees in an attempt to collect your debt. However, since agencies tend to have advanced tools like credit history analysis and skip tracing, they are able to efficiently collect a debt without bearing the high cost.

Legal Protection

Whenever you loan money to someone the proper and official way, various rules and government laws become effective on your deal. While you may not be an expert on all of them, your borrower would not hesitate to sue if they find some of their rights under the deal being violated.

Moreover, federal and collection laws may differ depending on which state and country you reside in. Therefore, your surface-level knowledge of the sector may not be enough to provide you with legal protection.

Debt collection agencies have experts that are well-versed vis-à-vis the applicable laws of the sector. They understand the nuances of the law and hence know which measures to take to recover your loan efficiently while staying within the realms of the law.

Therefore, any legal risks that are associated with collecting the debt are eliminated when professionals are involved in your transaction.


Different organizations have varying needs when it comes to recovering their debt. This is why a one-size-fits-all policy cannot be adopted. Moreover, while some agencies may charge a flat fee, quality ones offer customized packages as per the needs of their customers.

If you conduct your research correctly, you will find a collection agency that is best suited for your business model. For instance, if debt collection is a significant part of your business, opt for an agency that charges a flat fee. If not, a commission-based package is ideal.

The fact that such agencies exist means that businesses can easily reduce their cost of collection.

Optimum Debt Recovery

Just like your business might be an expert in its niche, collection agencies are experts in theirs. What might appear as a service to you is actually a flourishing sector.

And agencies that operate in it have a lot of experience under their belt. Hence, opting for a collection agency helps increase your chances of recovering delinquent debts. A collector knows which techniques to use to force debtors to pay.

Not to mention that by assigning the task to experts, you can focus on your business’s primary purpose. This way, while you do what you are good at, experts collect your debts on your behalf.

Adequate Documentation

One of the biggest challenges for any business when suing delinquent debtors is to prove your efficiency in trying to collect the debt in front of courts.

However, since collection agencies are experts in their field, they document every attempt and communication with debtors. They will have organized records of all the times they tried to contact the debtor.

This won’t just help in illustrating to the court the amount of effort you put forth to recover the debt when you sue the borrower, but it also comes in handy when claiming for a tax reduction for the bad debt.

Professional Advice

Credit management is at the heart of what a collection agency does. Apart from collecting your debt, it can provide you with support and advice regarding your business’s credit management practice.

Additionally, while you are the lender in one equation, you might be a borrower in another. If your business has taken loans, a collection agent can tell you the best ways to get out of debt. They can share information regarding the relevant laws you should be aware of, as a borrower.


All in all, there are various benefits of hiring a professional debt collection agency rather than taking the responsibility yourself.

Do your research and hire the best one out there. While you monitor their performance, let them take control of the steering wheel while you focus on what matters – your business.

With both parties focusing on their expertise, your business is bound to thrive.

Leave a Reply

Your email address will not be published. Required fields are marked *