Difference between Debt Buyers, Debt Collections, and Debt Consolidation?

Debt Buyers and Debt Collectors are the services used by debt lenders manage bad debts, whereas Debt Consolidations are the financial strategy for improving personal debt loan. They are used to resolve different issues and functions quite differently.

At the elementary level, debt buyers are the companies that play the role of a client. They serve as a pseudo-originator to the debt collector; debt collection is the activity of going after the borrower to have the debt paid; whereas debt consolidation is useful for reducing the total number of creditors you owe. Let’s dive into them to learn about them more.

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Debt Buyers

It is a company that buys all the debts from the creditor at a discount. They generally pay a deficient percentage of the face value of the obligations. After that, they either collect the debts by hiring collection agencies or resell a proportion of debt. They even manage to obtain the mortgage on their own. Some of the time, they also use a combination of any of them to collect the debt amount.

Debt Buyers can be further classified into two forms, namely, Active Debt Buyer or Passive Debt Buyer. When the company of firm collects all the Debts themselves, then they are known as Active Debt Buyers whereas when they hire some other authority or any law firm to recover the debts, then they are known as Passive Debt Buyers. The overall approach of the Debt Buyer firm is to leverage as much profit as possible. Debt Buyers purchase the debts at low rates from the creditors. Some time even in pennies on dollars hence even small repayments result in again for the company.

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Debt Collection

Debt Collectors are agencies that are hired to recover the debt owed by the debtors. They are generally offered the payment in the form of some percentage of the debtor according to their fee. Some of the debt buyers also work as debt collectors as it increases their profit percentage. They were the most hired in the situation where the debtor/borrower is unable to settle his debts or fails to make scheduled payments on the mortgages. In this scenario, the debtors not just lose their credit score but also turned over to collect the debts within a period of three to six months of default. In most cases, the company finds it beneficial to appoint a debt collector to recover the unpaid debts in-spite of chasing the borrowers themselves.blank

Debt Consolidation

 It is described as the act of paying off all the loans and taking a new loan. In other words, it is a strategy to merge all of the debtor’s mortgages into a single debt. That makes it more favorable for the borrower in the payoff terms. The borrower should tend to his authority first to consolidate all the mortgage. If the debtors don’t have good relations or a valuable credit store, then his second priority should be to explore the private mortgage firm. The consolidations generally can be classified into the following two types, namely Secured and Unsecured loans. The Secured loans are backed by debtor’s assets such as house or car, whereas there is no back up for Unsecured loans which makes it a bit tougher to obtain the repayment.blank

Conclusion

From the above context, we got to know that there is a lot of difference between the Debt Buyers, Collection, and Consolidation.

Debt Buyers are the companies or firms that buy all the mortgage from creditors at a lower proportion. Then they recover the debt from the borrower themselves to earn the profit. The firms that are hired by the loan authorities to collect the debts from the borrower are termed as Debt Collection Agencies. Debt Consolidations are the strategy of taking a new loan to pay off all the other liabilities.

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