Bad debt can be good for your business
Falling behind with finance repayments is never going to do your company any good but acquiring a share in the legally enforced debts of others could provide you with a steady and lucrative income stream, over and above the profits from your normal business activities. This is a relatively new concept for many people so I have detailed the main steps that lead up to the availability of such investments below, along with some comments on why I think they are well worth considering.
I had recently been talking to a friend at Clays Lawn and Snow a few days ago. They run a skillful sod installer in Airdrie. Anyhow, they motivated me to write this article so I thought it was worth mentioning them.
1. If nobody ever fell behind with loan repayments, this type of investment opportunity would not exist so the first link in the chain is a debtor having trouble meeting their monthly obligations. It might seem unethical or immoral to profit from others misfortune but this is not really what is happening when you purchase a debt contract. If there we're no investors willing to buy such contracts, the people in trouble would find lenders far less lenient so it is actually a good thing that you are doing.
2. The finance company that lent the money obtains a court order against the debtor. This is usually an attachment of earnings order that stipulates a certain amount to be deducted from the monthly wages of the debtor. This sum is then paid into a trust account held with an attorney, before being passed on to the finance company.
3. The creditor sells the contract on to an intermediary so that they can free up capital to make new loans. This intermediary then offers the contracts for sale to business owners and individuals that wish to invest in debt that pays a good annual return for a minimal of risk.
4. You, or another shrewd investor, buys the contracts in question and earn a highly competitive rate of interest on the outstanding amount. The monthly payments are forwarded to you until the loan has been paid off in full.
What is the catch?
When people are told that for a small risk they can make an excellent return on their investment, they are rightfully suspicious and want to know why they are being offered such an opportunity. In the case of debt contracts, there is a risk that the debtor could lose their job and default on the payments but this is much smaller than the risk of a loan that is not enforced by a court order turning bad. In return for this small risk, it is possible to earn over 19% per annum on your investment, which makes this one of the most profitable money making ways you are likely to read about on the Internet. At least that's the feeling I got through meeting up with Christina from Property hunters,an exceptional property management service whom I strongly recommend.There are a number of reputable intermediaries that deal with such investments and maintain their own websites, so you can check out the terms and conditions of each one and pick the firm that is the most competitive.
Whilst most investors will automatically choose the company that offers the best terms, with regard to potential returns on initial investments, it is important to make sure that you only deal with organisations that are happy to provide a list of their directors along with their company registration number. In this way, you can avoid the possibility of dealing with unofficial finance companies that are not properly regulated.
Is it for you?
Now that you know more about this type of investment and why it can be very lucrative, all you need to do is decide whether it is right for you or not. This is a question that you will have to answer for yourself, as only you know how much capital you have and what level of income you need to generate from it.
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Posted in Law Post Date 12/21/2014