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How to use installment plans for debt collection - Collectia Inkasso
Sebastian S.
27/06/2022

How to use installment plans for debt collection

For many lawyers and debt collection companies, installment payment is a frequently used tool in debt collection.

Debt collection is much more than just sending reminders, collection notices, charging interest and the like. Installment plans are a big part of an effective debt collection process if the customer cannot pay - but is willing and able to do so. With an installment plan, you can offer your customer to divide the amount owed into several installments. This way, they can settle their debt quickly and efficiently without jeopardizing their finances.

In this post, we focus on installment payment plans, how to use them and why you should use them - if your customer does not pay your invoices.

What is an instalment payment plan for debt collection

An installment payment plan for debt collection is very similar to a normal installment payment plan; the customer divides his payment into smaller chunks, which are paid regularly over a fixed period of time.

In the context of debt collection, an installment plan is a good and effective tool. It allows the customer to pay in installments, rather than holding on to the full payment, which you are unlikely to be able to do. Thus, the alternative to an installment plan is - no payment.

When should an instalment facility be offered?

Installment plans are effective - so why not always offer one? There are many reasons for this. First of all, an installment plan defers payment and pushes your cash flow.

An installment plan is a tool for debt collection and debt recovery - on par with sending reminders, debt collection notices, using the bailiff's court or making attachments.

So when does it make sense to use installment plans for debt collection? There is no legally unambiguous answer to this question - and perhaps the installment plan should not be offered at all if you, your debt collection company, your lawyer or the customer themselves assess that full repayment is possible - or if your customer does not want it.

An installment payment plan can be offered, for example, if your customer expresses a willingness to pay - but does not have the ability to pay the full amount - and you as the creditor, or the debtor's representative, want to accommodate this.

What do you need to be aware of in relation to instalment plans?

Despite the fact that an installment plan is often very effective in connection with debt collection - there are also a number of factors that you as a debtor should be aware of. Factors that may even mean that you should not offer one at all.

Firstly, you should be aware that an installment payment plan requires time and resources from you, your lawyer or your debt collection company. Because whether the installment payment plan is paid over 2, 3 or 20 months, all other things being equal, it requires extra bookkeeping and follow-up. That's resources and time spent on invoice follow-up that you don't experience if customers only make full payments. For this reason alone, many people choose not to offer this service in the debt collection process.

Secondly, you should be aware that you may run the risk that the customer does not respect his/her installment/payment plan. So what do you do?

A practical tip on instalment plans

If you want to offer your customer an installment plan, make sure that it is taken over the shortest possible period of time. However, it should be a realistic period so that your customer is actually able to meet their monthly repayments. The balance between the two is difficult - and often requires experience in dealing with installment plans.

150 years of experience to help you with debt collection - and your repayment plans

Does your business need help with debt collection - perhaps including instalment plans?

As a professional and authorized debt collection company, Collectia has more than 150 years of experience in professional and efficient invoice collection - and every single day helps large and small companies to recover unpaid invoices.

Do you want us to help you too?


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