The Psychology of Debt: Understanding Debtor Behaviour - Cobra Financial Solutions Ltd

No-nonsense, straight-talking debt collection service

There are a lot of emotions that come with being in debt; stress, anxiety and shame are all common. Though there’s a lot of negative feelings that come with being owed money, that’s not to say that debtors don’t also experience emotional struggles. This is why it’s important to understand debtor behaviour and how the psychology of debt could be affecting their actions.

 

 

Why You Need to Understand Your Debtor’s Mindset

Financial concerns – which includes debt – are some of the most stressful things a person can deal with. The emotional turmoil of being in debt can be a lot to handle, to the point that it could deter a debtor from dealing with the problem. In fact, many debtors don’t engage with a debt collection agency, simply because the stress makes it feel as though it’s too much to handle.

 

You might even find that your debtor is in denial about their financial situation, or they are disputing that the money is owed at all. Some debtors are worried about legal consequences, others are more concerned with how it will impact their credit score. They might even be fearing judgement from friends and family.

 

By understanding your debtors’ mindset, it’s a lot easier to understand what’s holding them back from paying. This is why it’s so important to take the time to communicate with your debtor; find out what’s holding them back, if they are finding being in debt stressful, and what they can genuinely manage in terms of payments.

 

 

The Role of Communication in Successful Debt Collection

If you want to successfully collect a debt, you need to prioritise communication. Tone, language and communication approach can impact how a debtor responds to you. If you are aggressive, you might find that your debtor is hesitant to engage with you, leading to resistance and a stalemate. This is why, at Cobra Financial, we focus on communicating in a respectful and positive way. We assert ourselves and show debtors that we mean business, but in a way that makes us approachable.

 

 

Debtor Psychology Impacts Debtor Repayments

Looking at the psychology of a debtor can help you to get a better understanding of why debtors make certain repayment decisions, and these insights can be hugely enlightening. Instead of simply focusing on getting a debtor to pay, focus on emotions and what’s influencing them socially. You can use this information to determine how people manage their debtors, and how they are most likely to respond to your requests for payment.

Some debt collection agencies focus on conveying the negative consequences of not paying a debt, such as the debt being taken to small claims court, in a bid to ‘scare’ someone into repaying. This can backfire, with many debtors feeling intimidated by the huge task ahead and avoiding paying altogether. But, it can actually be advantageous to focus on the benefits of paying it off in time. Instead of intimidating a debtor, this approach can encourage them to take a small step forward, in the form of a repayment plan.

 

 

At Cobra Financial, we take the time to understand debtor behaviour, and we do everything in our power to understand what’s holding a debtor back from repaying what they owe. With this approach, and our various debt collection techniques, we can help you to recover funds that are rightfully yours. Contact us today to find out more.

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