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5 Tips for Achieving More Effective Collections
Managing collections can be a challenging task for lenders. Effective collections are crucial for ensuring financial stability. Here are five tips to help lenders achieve more effective collections: 1. Meet the Borrower Where They Are
Knowing your borrower and what their preferences and tendencies are goes a long way in avoiding delinquencies. For example, guiding a borrower to set up autopay may be what a forgetful payer needs to avoid missing payments. Also, finding the method of communication that a borrower most prefers, SMS, email, or chat, may also help that borrower feel like their lender is meeting them where they are.
2. Implement a Reminder System
It's easy for invoices to slip through the cracks, leading to delayed payments. Implementing a reminder system can help. Send out friendly reminders to customers as the payment due date approaches, reminding them to pay. Again, such reminders should be through the communication method preferred by the borrower.
3. Offer Flexible Payment Options
In some cases, customers may be unable to pay the full amount owed all at once. Offering flexible payment options can help accommodate their financial situation while still ensuring you receive payment. Consider allowing customers to pay in installments or offering alternative payment methods, such as credit cards or electronic transfers. By providing flexibility, lenders can make it easier for customers to pay and reduce the risk of non-payment. Such flexibility also helps the borrower understand that the lender's goal is to help with the management of the loan, not to punish the borrower in difficult financial situations.
4. Develop Strong Relationships
Building strong relationships with your customers can significantly impact your collections process. Establish open communication. Take the time to understand your customers' needs and circumstances to work together to find solutions. A positive relationship increases the likelihood of prompt payments.
5. Act Promptly on Delinquent Accounts
It’s likely that some customers may still fall behind on payments. Act promptly when accounts become delinquent to prevent further escalation. Implement a collections process that outlines specific steps for handling overdue accounts, including follow-up actions and escalation procedures.
By following these five tips, you can streamline your collections process, minimize overdue payments, and strengthen your relationships with customers. With a proactive approach and a focus on communication and flexibility, you can achieve more effective collections.
If you would like to learn more about our loan servicing software or how we can help you, email us at solutions@shawsystems.com. Follow us on LinkedIn for more blog posts.