How To Make Money Off Other People’s Debt

Yes, you read the title right. There has been some talk about this lately since a book came out entitled Bailout Riches. Well, the book’s concept is correct. You can make money off other people’s debt. His avenue of acquiring the debt is a little backwards, or outdated, and no it is not for everyday people like is suggests. So how does it work?

Think about it this way. How are companies making money off other’s people debt? That’s simple – interest right? Well, what happens when the people stop paying on their bill altogether? The company loses that money. When a company wants to recoup the money, they find a debt collector. So, the debt collector works for the company and collects debt for them, which at that point is called charged-off debt. A lot of times the credit companies have a division of debt collectors. Well, it also the same concept. You own the debt and the people owe you, right? When companies think they’ve done enough to collect, they completely charge-off the debt and sell it to a debt broker. The debt broker then sells it for pennies on the dollar to whomever wants it. Yes, sometimes these debt collections get moved for 1% of the debt’s value. So, how do you make money off it?

First off, you can intercept this debt at many points. You can be the debt collector and collect on debts usually gets backing 30% of the money and then taking 30% for a fee and giving the other 70% back to the bank. This way, you don’t buy the debt. You never own it, and you’re making 30% on anything you get back for them. But, who’s going to trust just a person off the street to do this for them?

You can act as the debt broker and have the banks sell you the debt and turn around and sell it to debt collectors for profit. They usually move a million to hundreds of millions in debt at a time (on average for around 5% of the debt price), usually making a very small percentage off this, but adding up to a lot of money for one transaction.

The third place to be is on the other end of the debt broker. You can buy debt from a broker and then go after the debt yourself collecting on it. Say you find a small amount like $300,000 of debt being sold for 1%, which totals $3,000 for an investment. Now, you go and contact the people and strike deals with them so they only have to pay a fraction of it back to you. If you get 2% of it back, you just made $3,000 profit. Or you could hire a debt collector to collect on the debt for you and pay them 30%, but remember collectors have usually already tried to get them to pay already by the time it gets to you then. I don’t know how successful businesses profit off of the bottom of the barrel, but there’s got to be a better way then calling and asking them. I’ve heard of some debt buyers picking up the bottom of the barrel debt and taking them to court and having it slapped on other assets of theirs, or garnished from checks.

When you are on top and people owe you, you have a lot of power, but in this instance you have a lot of enemies too. I wouldn’t want to be there, but hey, out there are some people who don’t care how much they are liked. One place I know of to buy debt is Debt Connection.

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