1.Laxity in collection would merely invite more difficulties in collection and at the same time helps convert potential good borrowers into poor ones.
2.The longer the receivable remains outstanding, the longer the bank becomes continually exposed to hazards and risk of non-payment or loss.
3.Prompt collection tend to reduce the investment required in receivables and its capital cost.
STEPS TO BE TAKEN IN COLLECTING FROM DELINQUENT BORROWER
1.Maintain a regular, continuous follow-up. 2.Keep in constant touch with the borrower. 3.Try to be cooperative and helpful. 4.Always show courtesy but nevertheless firm. 5.Exercise some compassion and understanding as circumstances would indicate. 6.The bank must not hesitate to use all available resources to enforce collection.
Classes and types of delinquent borrowers Classes and types of delinquent borrowers
BORROWER WHO FORGOT TO PAY BORROWER WHO FORGOT TO PAY This is the easiest type of borrower to extract payment from. They are basically good borrowers who due to hectic schedules or unforeseen circumstances unintentionally missed payment on their loan amortization. This is the easiest type of borrower to extract payment from. They are basically good borrowers who due to hectic schedules or unforeseen circumstances unintentionally missed payment on their loan amortization.
2.BORROWER WHO IS NOT ABLE TO PAY Majority of them have the means of paying their loan but become delinquent not out of their own making but in some instances was brought about by events beyond their control, resulting to temporary dislocation of family budget. This type of borrower will not hesitate to pay his loan as soon as he is provided with an opportunity. Majority of them have the means of paying their loan but become delinquent not out of their own making but in some instances was brought about by events beyond their control, resulting to temporary dislocation of family budget. This type of borrower will not hesitate to pay his loan as soon as he is provided with an opportunity.
3.BORROWER WHO IS NOT WILLING TO PAY This type of borrower normally has the means or has the capability of paying his loan but find it hard to part with his money. Generally they are borrowers who: 1. are able to pay but unwilling at the moment 1. are able to pay but unwilling at the moment 2. are able to pay but is unwilling to pay 2. are able to pay but is unwilling to pay
BORROWER WHO IS NOT WILLING TO PAY Some of them exhibits the following type of characters like:
“POLITICIAN TYPE” This type of borrower does not deny the existence of his debt nor he shun away from the presence of collectors. This borrower has many reasons for not paying and always ask for postponement in paying his loan. He always makes the collector feel welcome at his place and in some instances treats them with free coffee or merienda. Almost in all instances the collector returns empty handed since he is being awed by such action.
“HABITUAL COMPLAINER” This type of borrower has always certain grievance or complaints, fabricated or otherwise every time collector visits him. In some instances they are designed as smoke screen for his failure to meet his obligation on time. Complaints may range from poor service, usurious interest rates and exorbitant penalty charges.
“FINGER POINTER” This type of borrower usually points to other borrowers to collect from. He feels that he will only pay his loan if other borrowers pay first ahead of him. His usual response is “ I know you must have others who owe a lot more than I do. So why pick on me?”
“ELUSIVE TYPE” This kind of debtor is elusive as an eel. Many of them maintain two doors, one to gain entry and the other as an exit without being detected by those who are waiting for them. They usually leaves their house very early in the morning and come back late at night. In some instances they instruct their employees or members of their family to provide alibis for collectors.
“HOSTILE TYPE” This borrower normally shows a belligerent attitude towards collector. They are always arrogant and proud and often hurl brickbats to the bank. In some instances they challenge the collector to a fist fight, a mentality and behavior reminiscent of the days of the old frontier wherein might is right. They are irked to see the presence of collector and sometimes in order to drive them or scare them away they let loose their dog so as to chase the collector whom they consider as intruder.
“ In order for a collector to be effective and successful on his assigned task he must strategize and formulate action plans in enforcing payments on these borrowers. He must develop techniques on how to approach a certain type of borrower, how to handle problem borrower and the most important is- how to obtain prompt payment from them.”
1.Frequent visitation/constant follow-up immediate visitation upon missed amortization Before visitation double check records show courtesy and tact if borrower fails to pay set date at earliest time for next visit make borrower feel that you are doing him a favor by picking up his payments. refrain from collecting early/late at night
2.Explain advantage of early payment repeat loan avoidance of penalty/surcharge 3.Flexibility as to time/manner of collection.
1.Frequent visitation/constant reminder assess present condition of borrower/collectibility of future amortizations 2.Explain advantage of early payment 3.Develop good sense of timing. When is the proper time to collect? Must be familiar with “cash cycle” of borrower.
4.Flexibility as to time/manner of collection. 5.Develop close rapport. This would come handy in case of multiple creditors. 6.Appeal to the wife. Normally wives makes the family budget and pay the bills, moreover they’re more concerned in protecting the family reputation. 7. Inform co-maker. Enlist his help in convincing borrower.
8.Seek help of father/mother financial help/assistance convincing borrower to settle loan 9.Implement security agreement/chattel mortgage. Request for additional collaterals if present ones are inadequate. Be sure that borrower is absolute owner and properties are not subject to lien. 10.Explain to borrower/spouse the risk of court case.
ABLE TO PAY BUT UNWILLING AT THE MOMENT Borrowers who are characterized as: politician type habitual complainer finger pointer elusive type
1.Frequent visit/constant reminder more persistent and increased frequency of visit must have knowledge and familiar with other assets of borrower in case bank will institute court action. 2.Explain advantage of early payment. 3.Flexibility as to time/manner of collection. 4.Appeal to the wife. 5.Inform co-maker. Enlist his help in convincing the borrower. 6.Seek the help of father/mother in advising/convincing son/daughter to settle loan.
7.For borrowers imployed in government, make a personal or letter of appeal addressed to respective offices. 8.Implement security agreement/chattel mortgage. Request for additional collaterals. 9.Explain to the borrower/spouse the risk of court case. Emphasize cost of suit and damaged family reputation. 10.Have the legal department sent a demand letter threatening court action. 11.File case in barangay court,MTC/or RTC.
ABLE TO PAY BUT UNWILLING TO PAY Characterized by: hostile type
1.During visitation collector must be: courteous and tactful. show confidence, maintain composure and calmness during course of conversation. must not allow emotions to control decisions and actions. Avoid direct confrontation and immediately leave the place if borrower starts to show belligerent attitude.
2.Appeal to the wife. 3.Inform co-maker. Enlist his help in convincing the borrower. 4.Seek the help of father/mother in advising/convincing borrower to pay his/her loan. Inform them of borrower’s belligerent attitude towards collector/bank. 5.In some instances wherein borrower’s spouse shows belligerent attitude, immediately leave the area, avoid confrontational attitude. 6.For borrowers employed in government make a personal/ letter of appeal to respective offices.
6.Collector may seek the help of barangay officials in enforcing security agreement. Also enlist the help of the spouse in its implementation. Request for additional collaterals. 7.Explain to spouse the risk of court case. Emphasize the cost of suit and damaged family reputation. 8.Acquire information on other assets borrower owns in case the bank decides to pursue court action. 9.Have the legal department sent a demand letter threatening court action. 10.File case in barangay court, MTC/or RTC
The collector may now choose what action /collection technique(s) he may use in enforcing collection from those delinquent borrowers. Furthermore he may reclassify borrowers based on that classification during the course of his collection and apply necessary action(s) accordingly.