How to Buy Debt

How to Buy Debt

Debt buyers buy debt from corporations or the government allowing them to finance their operations or privately finance individuals and charge them fees and interest on the debt to earn income. They can also buy accounts receivables from companies for a fraction of the amount owed and then settle with the debtor, still making a profit.

No matter how you want to buy debt to earn an income, there are ways you can go about it. But how to buy debt? Let’s look at a couple different ways. 

Fixed-Income Securities

Fixed-income securities are bonds. You can buy bonds from the government, you can buy municipal bonds, or even corporate bonds. By buying a bond, you are lending that money to the bond issuer on the grounds that the bond will earn interest and you'll make a profit from it.

  • Government bonds can be purchased through banks or brokers.
  • Municipal bonds are usually purchased through bonds brokers. Whether you choose a full service broker that can also take care of other financial need or you choose to work with an online broker is completely up to you. 

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Accounts Receivables

There are several steps involved in purchasing accounts receivables as a form of income. However, if you want to purchase debt for pennies on the dollar and then collect on it to earn income, and you want this to be a steady form of income, here’s how. 

  • Start a Factoring (aka an "Accounts Receivable Financing") Company

The company will be the way you bring in the debt and way you bring in the income. The company will expand as you earn more and buy more so it’s a good idea to start the company early. 

  • Learn How to Best Handle the Business 

You will want to attend trainings or workshops, either in person or online, to learn how to: run the company, buy the debt, collect on the debt, and funnel the profits back into the company to expand it. You will want people to know that your company exists so that when they have debt they need to get rid of and want anything at all possible in exchange for it, even if it is pennies on the dollar, they will come to you to sell it. 

  • Evaluate Potential Debt

Not all debt is good debt. You want debt you have a chance at settling with the debtors with for more than what you bought it from the creditors for. So analyze carefully. 

  • Make the Purchase

Arrange for the purchase. You may have to take out a loan to make the initial purchase and pay it off once you settle with a few debtors. After that, what you make is profit. 

  • Collect from the Debtors

You will have to follow up with the debtors, within the guidelines of the laws of your government, to find ways of settling the debt with them. Once you make arrangements to settle, make sure you follow through to get the payment that was arranged. 

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Private Loans

If you provide a loan to someone who could otherwise not get a car loan or mortgage, you are not only providing them with a path to ownership they may not have had but you are also giving yourself means to an income. When you provide private lending services, you get to set the terms of the loans, which means fees and interest rates, provided they are within the laws set by your government, should there be any.

house real estate

You also get to keep ownership of the title to the car or the deed to the property until the loan is paid in full so if the borrower were to default on the loan, you would retain ownership of the vehicle or land. 

It is important that no matter what ways you plan on purchasing debt, and who you plan on purchasing it from, that you follow your investments closely. These are, in fact, investments, and you need to make sure that you are getting the most out of them, as any investment is something that you are putting your own money into to get something back out of. 

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