The Difference Between a Debt Buyer and a Debt Collector

Topics: Reading time: 4 minutes

Debt. The word alone is usually enough to strike anxiety in even the most financially secure people. The good news is that the more you know about debt, what can a debt buyer and what a debt collector can do, the better prepared you are to make smart financial choices about your own money.

In this day and age, more and more people are losing touch with their finances and how they work. As the saying goes, a fool and his money are soon parted. While this saying comes from a time when financial literacy meant little more than paying your taxes on time, it applies just as much today to our complex economy.

When it comes to basic questions about finances and credit, only 35% of women and 50% of men got them all right according to the latest Household, Income and Labour Dynamics in Australia (HILDA) study. Unfortunately, this lack of understanding leads to dangerous money habits like reliance on debt.

When it comes to debt, Australians are all too familiar with its crippling effects. The ratio of debt to income ratio has more than doubled between 1995 and 2015 in Australia, according to 2015 OECD data. As more Aussies are turning to debt to fund things like cars, homes, and everyday purchases, we could all use a bit of a refresher about how debt and credit works.

In this guide, we’ll discuss one of the darker sides of debt. What happens when the debt goes unpaid? How is your debt handled by your lender? These are the questions we will answer in the guide to debt buyers and debt collectors. Luckily, it’s not as scary as it sounds!

What Is a Debt Buyer?

First, we need to identify what a debt buyer is if we’re going to understand how it differs from a debt collector. When you borrow money from a lender, you expect to only deal with that company. When you make payments, they’ll be to that company. However, what happens when you don’t pay on time or at all?

If you find yourself unable to pay on time, your original lender might try to recoup their lost funds. They know negotiating with you is a lot of time and effort, and they’re just trying to make as much money as possible. That’s where debt buyers come in. Debt buyers are any company that purchase debts from other companies with the intention of collecting on these debts.

Most likely, these debt buyers don’t pay that much for these debts, even for newer debts. They’ll generally pay less for old debts which are considered less collectible, but the overall takeaway is that they’re not paying much for these debts.

Let’s look at a simple example. Say you take out a $1,000 loan from a bank. If you fail to make payments, a debt buyer might buy this debt from the bank for $100. Now, when you pay the full debt to the debt buyer, they’ll be making a $900 profit on your debt. While it might seem like the original lender is getting the short end of the stick, they’re still able to recoup some of their money without needing to deal with the collection process.

These debt buyers purchase hundreds or even thousands of debts. Even if they only get some of the money back on these debts, they’re easily able to turn a profit since they purchase them for such low prices. However, this is bad news for consumers. Having your debt sold to a debt buyer will likely impact your credit score if you don’t pay quickly, and you’ll have debt collectors to deal with.

What Is a Debt Collector?

Speaking of debt collectors, what are they? How are they different from debt buyers? As we said before, the buyers are the companies that purchase debt from the original lender. Debt collectors are actually third-party companies that collect debts on behalf of other companies. Your debt buyer might have a debt collector within their own company, or they might use a third-party.

If a debt collector is trying to collect on your past debt, you’ll likely face a bit of harassment. Debt collectors are known to repeatedly call you, send you mail, and generally take extreme measures to pursue this debt. They could call your friends and family or even contact your place of work.

The good news is there are a lot of strict laws that dictate how these debt collectors can communicate with debtors. This means you should never feel threatened or coerced by debt collectors and you can report anyone who isn’t following the law.

What Are Your Options?

If your debt has been sold to a debt buyer or if you’re currently being contacted by a debt collector, what are your options? The sooner you take action, the better. First, always verify that the debt collector or buyer is legitimate. There are well-known debt scams that will pose as legitimate debt collectors but in reality, they are stealing your information.

Aside from verifying that this is, in fact, your debt, talk to the buyer or collector about a settlement option. It is generally much easier to settle with a debt buyer or collector for less than the full amount as long as you’re willing to pay immediately. You’ll often have a limited amount of time to act before this negatively affects your credit.

While it might seem scary to contact these companies, realise that they’re just trying to make a profit. If you demonstrate that you’re willing to work with them, you’re in a much better position to create a settlement plan that’s right for your wallet.

If you’re facing a debt buyer or collector situation, you don’t have to deal with this on your own. Debt Busters has over a decade of experience helping Aussies manage their debt repayments. It’s always a good idea to talk to our debt experts on 1300 368 322 before negotiating with a debt buyer or collector. Debt can be intimidating and you shouldn’t have to face these companies without professional help. Together, we can overcome your debt challenges and create a brighter financial future.


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Debt Busters is an Australian owned business which was founded in 2005 - since then we have been able to help thousands regain financial control.

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