Do you need to know how to collect money from a borrower? For many people, the first step is simply not to lend money, but that advice isn’t always practical or useful. If you find yourself in the unfortunate position to have to ask someone to pay you back, there are several things you can do to make the process easier for yourself.
How To Collect Money From A Borrower: Be Nice
Staying away from a hostile relationship is the key to many successful debt resolution scenarios. People who are angry tend to feel justified in whatever negative actions they take related to that situation; it’s important not to lose your temper and to appear flexible and accommodating regardless of how you actually feel inside.
Keep your anger and the anger of your debtor at bay for best results. You’ll have an easier time negotiating the payment.
Collecting Money From A Borrower: Be Detailed
It helps to have a detailed repayment plan before you need to ask for money back, but that isn’t always possible. So instead, the best idea is to try to add some structure to the debt repayment.
No matter how much is owed (beyond reasonable small amounts) you can divide the repayment into a series of smaller and less painful-to-your-debtor amounts. It may be a hassle for you, but getting the money back according to a plan helps you collect the debt instead of having to write the whole thing off.
The key in these cases is to approach the person who owes you as though you are trying to help them. People tend to respond better to offers of help rather than demands for payment. You’ll see this often in communications from landlords, rental agencies, etc. when they are trying to collect back rent.
How To Collect: Establish Boundaries
Is your debtor someone you know socially? Are they a co-worker or someone who otherwise moves in your private circles? If you have trouble making headway with the repayment, you can send a message by establishing personal boundaries about how you invest your time with this person while the debt is still outstanding.
If you were a source of help for them in the past with neighborly-type projects or advice, you may wish to reconsider such help going forward until you get satisfactory progress on the debt.
Do You Need A Lawyer?
In some cases, such as debts between friends or co-workers, if you need to consider hiring a lawyer it may be too late to prevent lasting damage to the friendship over the debt. But many don’t have the stomach to put a small claims lawyer on their friends or family, and who can blame them? Hiring a lawyer to collect a small claims debt (under $10 thousand) is costly and may not be worth the effort.
If you are owed money on a more formal agreement such as a rental or purchase contract, hiring a lawyer may be the right way to go–any dispute over a commitment made in writing likely requires the expert advice of a lawyer with experience in your state’s courts on this issue.