In the modern world, most credit institutions (banks, microfinance companies) face the need to collect debts from borrowers who do not fulfill their obligations on time. This can lead to serious negative consequences for such companies, so they are forced to work and take appropriate measures to repay overdue debts of counterparties, and here the question always arises: is it necessary to involve an external company specializing in the settlement of overdue debts to solve urgent problems!&nbsp; As world practice shows, financial sector companies quite often turn to external companies offering debt collection services without going to court, as this has a number of advantages described later in this article. Pre-trial debt collection procedure In general, pre-trial debt collection is a process that precedes a trial and includes measures to repay the debt without going to court. Banks, as large lenders, often face the problem of non-payment of debts on the part of borrowers. In such cases, banks use two main approaches to debt repayment: internal collection and outsourcing. Internal penalty Internal collection is a process in which a bank uses its own resources to collect debt. This may include calls and letters to the borrower, negotiations on debt repayment, as well as internal debt settlement procedures (for example, debt restructuring). Advantages of outsourcing in debt collection &nbsp;Using an outsourcing company has a number of advantages over collecting on its own: 1. Firstly, it saves time and money. The outsourcing company has more experience and expertise in the field of debt management, which can improve the efficiency of the collection process. It can quickly and effectively recover the debt without spending a lot of time on legal procedures, knowing and applying the most effective methods in each case.&nbsp; 2. Secondly, outsourcing can help the bank to save, among other things, its own labor resources and optimally allocate them, since the outsourcer company will deal with all aspects of debt repayment independently. This allows the bank to focus on its core business processes, increase the efficiency of the credit institution and, as a result, improve its financial situation.3. Thirdly, the use of an outsourcing company can help the bank avoid the negative consequences associated with debt collection. So, if a bank uses its resources to claim and repay a debt, this can lead to a negative attitude of the borrower towards the bank and affect its reputation. Outsourcing also allows you to maintain independence and neutrality in the debt collection process.&nbsp; 4. Finally, outsourcing debt collection processes can reduce stress for the lender. Long legal processes can be very nerve-racking and stressful for a lender. Outsourcing debt collection allows you to avoid this and focus on your core activities. In the Deloitte Global Outsourcing Survey, respondents were asked about the main advantages of outsourcing services in financial sector companies. About 65% said it helped them focus on their core business functions, and 63% mentioned cost reduction as a key advantage of outsourcing. Conclusion: world practice shows that the use of an outsourcing company is a more effective and convenient way of debt collection for banks, as fees for overdue debts increase and risks for creditors decrease. However, each bank must decide for itself whether to collect by itself or to attract an outsourcing company, and the choice depends on the specific situation and the bank's capabilities.

Debt collection. Should banks collect themself or attract debt collectors?