How do you set up a payment arrangement?
Payment arrangements are a common way to deal with debtors who want to pay but aren’t immediately able to. Their situation may be complicated, and while you aren’t required to work with them, it might be your best option for debt resolution. The following tips can help any creditor put together a payment plan.
1. What Can You Manage?
Make sure it’s possible for you. If your company is badly suffering from the debtor’s lack of payment, waiting might make the situation worse. Look over your financials and see if a payment arrangement will solve your problem or make it worse.
2. Check Their Credit
Before you agree on a payment arrangement check your debtor’s credit. It might be the debtor is just having a bit of bad luck, or a bad month, but they may simply have bad credit. If their financial situation doesn’t look good, a payment arrangement doesn’t make sense. An arrangement will only work if it’s feasible for the debtor.
3. Make A Payment Arrangement Schedule
If you’re going to make an agreement, it must be realistic and as clear as possible. Setting up a badly planned arrangement can only make the situation worse. Figure out the details, including:
- The amount to be paid
- The number of installments and payment dates. Remember to keep the payment schedule as short as possible with very few deadlines. If the arrangement is too long the chances, go up that your debtor will not pay.
- The Calculated interest (if any) on the installments
- What are the consequences if no payment is made? It’s best to insist the settlement be payable on demand if the payment arrangement is not followed. In case of continued nonpayment this gives you the right to immediate legal action.
Our credit collection specialists also suggest adding collection costs, outlining what the debtor must pay if they do not meet the agreement terms.
4. Get the Payment Arrangement in Writing
If you and your debtor have come to an agreement, make sure it’s recorded. Have a document outlining the agreement and get it signed by the debtor. This will help you avoid further miscommunication and prevent most debtors from trying to renegotiate in case of nonpayment.
If the amount is very large see if you can secure the arrangement in a notarial deed.
Want to know more about payment arrangements, demand letters or legal action? Contact us! Our debt collection specialists are ready to help.