The current economic crisis has created a situation where making money from credit card debt is actually an excellent business opportunity.
The following statistics illustrate the magnitude of the problem and potential opportunity. Innovest Strategic Value Advisors, a research company, reports credit card charge-offs were $22.6 billion for all of 2007. That figure rose to $76.9 billion in 2008 and $93.1 billion in 2009.
However, to profit from such a business opportunity you first have to know where you can buy credit card debts and there are three (3) main sources where you can purchase credit card debts:
1. The Government
3. Loan Brokers
Let’s take a brief look at each source.
1. The Government
You can purchase loans from the FDIC (Federal Deposit Insurance Company). Loans for sale are advertised directly on their website. The information that is displayed includes the:
~ Type of loan, e.g. commercial, industrial or consumer,
~ Source of the loan, i.e. the financial institution where the loan came from,
~ Aggregate face value of the loan,
~ Average balance of each loan,
~ Status of the loan, i.e. performing or non-performing,
~ Period of time allocated for review,
~ Bid day,
~ Date by which successful bidder has to pay for the loans.
It’s clear to see the importance of this information but this is still just scrapping the surface when it comes to the analysis you should perform on each loan to make a decision as to whether or not you want to submit a bid for the loans and how much you want to place your bid for.
You can also purchase loans direct from your local bank and by this I don’t mean a local branch of a national bank. The manager of the latter would not have sufficient flexibility or clout to be able to negotiate the sale of any failed loans that they might have. However, with a small, local bank, if you approached your bank in the right manner, an offer to purchase failed loans which the bank has had to charge-off, could seem quite lucrative. Bill Bartmann goes through a very detailed, step-by-step procedure as to how to approach a local back with a view to purchase their delinquent loans in his book best-selling book Bailout Riches: How Everyday Investors Can Make a Fortune Buying Bad Loans for Pennies on the Dollar.
3. Loan Brokers
Purchasing loans from a loan broker can be more expensive but loan brokers segment their loans more and so the profiles of the package of loans that they put together are more similar. And if you’re just starting out in the debt collection business then you’re likely to have greater success if you narrow your focus and not consider loans of a broad spectrum. You’ll probably also find that you’re able to make a profit faster when you take this approach.
One example of a loan broker is the NLEX (National Loan Exchange Inc). It is the “leading source of debt portfolios on the web”. However, to be able to view any of the loans that are currently for sale you have to register with the site and you have to complete a Buyer Confidentiality Agreement and a Buyer Verification Form. Your account will not be enabled until you’ve submitted all the required information.
The NLEX has sold approximately $100 billion dollars of debt and so have a wealth of experience in this area and is a highly reputable company. Therefore, if you’re considering making money from credit card debt (or other forms of debt) then it’s worth your while to register with the NLEX.