Debt Buyer

AAA

DEFINITION of 'Debt Buyer'

A company that purchases debt from creditors at a discount. Debt buyers, such as a collection agencies or a private debt collection law firm, buys delinquent or charged-off debt at a fraction of the debt's face value. The debt buyer then collects on the debt either on its own or through the hiring or a collection agency, or resells portions of the debt, or any combination of these alternatives. Debt buyers primarily purchase delinquent debt arising from credit cards, automobile loans, medical bills, mortgages, retail accounts and utilities.

INVESTOPEDIA EXPLAINS 'Debt Buyer'

Debt collectors generally pay a very low percentage of the face value of the debt. Debt buyers exist as small, private businesses or large publicly-traded companies. They are classified as active if they try to collect on the debt themselves, or passive if they hire an outside collection agency or collection law firm to recover the debt. The debt buyer business is a multi-billion dollar industry.

RELATED TERMS
  1. Cash Management

    The corporate process of collecting, managing and (short-term) ...
  2. Delinquency Rate

    The percentage of loans within a loan portfolio that have delinquent ...
  3. Creditor

    An entity (person or institution) that extends credit by giving ...
  4. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to ...
  6. Charge-Off

    A term describing an expense on a company's income statement. ...
RELATED FAQS
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  4. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  5. How do I use the rule of 72 to estimate compounding periods?

    The rule of 72 is best used to estimate compounding periods that are factors of two (2, 4, 12, 200 and so on). This is because ... Read Full Answer >>
  6. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
Related Articles
  1. Budgeting

    Negotiating A Debt Settlement

    If you're being harassed by a debt-collection agency, you can take charge. Find out how.
  2. Personal Finance

    Outfox The Debt Collector's Hounds

    Dealing with a collection agency is scary if you don't know your rights. We help you take back the power.
  3. Entrepreneurship

    Small Business: Speed Up Receivables To Avoid A Cash Crunch

    Waiting for customers to pay can be a losing game. Look to factoring for quicker cash.
  4. Credit & Loans

    A Guide To Debt Settlement

    Find out how you can negotiate your way to a lower debt load by paying up front.
  5. Budgeting

    Debt Consolidation Made Easy

    These five steps can help get you out of debt faster and easier than you'd ever imagined.
  6. Options & Futures

    When You Can't Pay Uncle Sam

    If you can't pay your taxes, there are some steps you can take to protect yourself. Discover your options here.
  7. Budgeting

    Top 6 Best Value Hotels

    Here are the top value hotels across America, most of which can be had for less than $100 per night and less than $50 per night if booked in advance.
  8. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  9. Economics

    What is a Subprime Mortgage?

    Subprime mortgages are offered to borrowers with low credit ratings, usually 600 or below.
  10. Home & Auto

    Strategies To Buy The Perfect Vacation Home

    Ask yourself these six questions to make the right decision about a vacation property.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!