Lenders bundle thousands of delinquent accounts (credit cards, medical bills, personal loans) into portfolios.
When lenders like banks or telecom companies cannot collect on debts (often after 120–180 days), they "charge off" the debt and sell it to recoup some losses. how to buy debt for collection
You can either collect the debt in-house or outsource it to third-party agencies. 2. Where to Buy Debt Portfolios Large banks run structured sale programs
You must maintain impeccable documentation proving you legally own the debt to collect or sue for it. 4. Critical Success Factors and extensive licensing.
Disciplined buyers typically target a 12% to 20% net internal rate of return . How to Start a Debt Buying Business Model: Operator's Guide
In the US, licensing is state-by-state. Even if you don't contact debtors directly (passive owner), many states still require a debt buyer or collection agency license.
Large banks run structured sale programs, but usually require a Master Purchase and Sale Agreement, audited financials, and extensive licensing.