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Why do people who owe money get discounts?
Why is it, if you are in debt to big firms they will give you a discount?
I have an example. Someone owes company £508.00. if you pay in 28 days will take £381 off debt. Amount to pay £127 instead of £508. or they may take legal action.
They never do this for me as I always pay my bills.
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I thought that these bills were "red letter" bills which included expected collection and enforcement costs which can be waived for swift settlement.
However, if you are a utility company, and you've got somebody struggling to pay, then as these are the baseline bills that everybody prioritises, then the chances are that there are many other creditors at the door. You accept a discount to get some cash in as an alternative to an expensive legal process in which you might get very little. It seems galling to people who pay regularly, but remember that in doing this they are trashing their own credit records.
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Debt collection companies buy the debt from Banks/utility companies so that they get something back and do not have to pay to chase the debt. Then the Debt collection companies chase you, if you pay the full amount back they are quids in but if they can get you to pay more than they paid by giving you a discount they are still in profit. But paying off by way of a discount still affects your credit rating as the debt is "not satisfied" and still shows on your files.
So because you pay everything regularly and on time why not set up as a Debt collection agent and buy a £10,000 debt for say £2,500 and offer the debtor a discount to say £4,000/£5,000 and sit back and watch the money flow in. But you will occasionally get someone who has no intention whatsoever of paying and you can pay to take them to Court. Swings and Roundabouts.
Funnily enough if you have nothing on loans/credit cards you are not really of any interest to the people who get their fingers burned by lending to people who pay fortunes in interest. Funny old world.
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Usually, because they are in so much ****, It's better to get something rather than nothing. Not a situation to aspire to or be jealous of.
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Originally Posted by
Ceam
Usually, because they are in so much ****, It's better to get something rather than nothing. Not a situation to aspire to or be jealous of.
I can see the original posters point you pay your way whilst others don't but you keep your good name whilst others don't. You're much more inclined to get a cheery hello and a brew off your Bank Manager if you have borrowed a fortune off them rather than if you have no loans or credit cards.
In fact if you have never had loans or credit cards it is harder to get them as your credit rating does not show you as a good payer. The more you have borrowed and paid back the easier it is to get money.
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Originally Posted by
Little Londoner
I can see the original posters point you pay your way whilst others don't but you keep your good name whilst others don't. You're much more inclined to get a cheery hello and a brew off your Bank Manager if you have borrowed a fortune off them rather than if you have no loans or credit cards.
In fact if you have never had loans or credit cards it is harder to get them as your credit rating does not show you as a good payer. The more you have borrowed and paid back the easier it is to get money.
Yes - bizarrely the best credit ratings go to those with a track records of borrowing and paying it back, rather than those with the best cashflow. To a certain extent, with current interest rates you are better borrowing a bit than saving for something which is inflating in value at a higher rate than your money earns interest.
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There are two reasons why they get discount.
1) The original business who is owed money, will claim the outstanding balance through their insurance. This means they actualy receive the full amount of the loan etc that they lent out.
2) They sell the debts at a really low price.(actual rate is unknown but it is low) So, for example, a £500 debt could be purchased by a debt collector for as little as £30. The debt collector will try and collect the full amount, by sending threatening letters, intimidation etc. If the person doesn't reply to any letters or make contact, the debt collector will try and tempt them with a reduced settlement offer.
Even with an offer of 50% or 25% only to pay. (£250 or £125) the debt collector will still make a tidy profit. There is no legal requirement to pay them though. At the end of the day, they are just parasites, feeding off peoples misfortune.
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