What is classed as a bad debt?
Bad debts are usually classified by lenders as write-offs in that the borrower has already defaulted and shows little interest in paying back the loan even after much effort on the part of the lender. The other term that banks use for bad debts is NPL's or Non Performing Loans. As the name suggests these are loans where the lender has given up on collecting.

However, whilst the lender may have given up, there are specialized debt-agencies who are only too pleased to chase you. Indeed they make a business of it.

Specifically they buy bad debts. The debts are often "sold" to a debt agency by large lenders who have "given up chasing you".

Bad Debt Agencies
The bad debt-agency might, for example, pay £120 cash to the unlucky lender to take ownership of a £1000 debt. Of course they are speculating that they will have better luck in finding you - to subsequently recover the full amount, thereby making a profit. The benefit to the original lender is that he clears his books of the original £1000 debt, settles his accounts for tax purposes, and receives the consolation amount of £120 that the agency paid him.

This practice does indeed prove that lenders are very used to writing off large parts of delinquent loans in order to recover just some of the money.

If you happen to find yourself dealing with an debt-agency - you will need to remember that they have bought the debt as a speculative gamble, and are unlikely to sell it at a loss. But there are ways to appease even these more aggressive creditors!

For more on how bad debts are handled by lenders and how to improve your credit standing , the Complete UK Credit Repair Guide provides valuable information to help you to get new loans and credit cards. For details about the guide please click here