Creditors and lenders have different names for different types of debtors, each describing a pattern of behavior related to the account. Once categorized, creditors and lenders may behave differently towards you, which could affect how likely you are to receive help when needed or willingness to negotiate debt repayment. To better manage your account when finances become tight, learn which type of debtor you are and how that affects your chances with your creditor.
The Slow Payer
This is the most common type of debtor experiencing financial hardships. Slow payers evolve because of underemployment, overspending or unexpected expenses. In general, they have a tendency to get one to two months behind on payments, but do consistently make a payment each month. Slow payers also generally pay the minimum required amount each month, dragging out the life of their loan for years beyond necessary. Creditors and lenders are typically willing to negotiate changes to the terms and conditions of the accounts of slow payers due to their consistent payment history; however, slow payers have more luck when they contact the creditor early on to arrange a plan.
The Willing but Not Able
When financial hardships last longer than expected people end up becoming a willing but not financially able debtor. This has become the fastest growing group of debtors over the past few years, due to economic conditions. Many of these debtors end up in debt settlement negotiations or bankruptcy to provide relief from their debts. Creditors and lenders would prefer to negotiate with a willing but not able debtor rather than have the debts repaid, settled or eliminated through bankruptcy. Therefore, always check your options with a creditor or lender before filing for bankruptcy.
These debtors take on two forms: (1) the credit criminal, who purposely avoids payment and may engage in fraudulent activities or (2) the able but not willing to pay, who tends to rack up large amounts of debt and “work the system” to find ways out of liability for those debts. Both types of debtors are highly problematic for creditors and lenders. Neither of these debtors is likely to receive help directly from the lender, nor through bankruptcy if their actions are deemed fraudulent.