Moon Twp, PA (PressExposure) August 18, 2009 -- The meaning of collection in a debt recovery sense refers to the process of attempting to âcollectâ on a âbadâ or non-performing loan as part of a debt recovery process.Visit at http://www.nationalmanagement.net. The ageing of non-performing loans is strictly controlled by the banking community within a particular country because it has direct implications on the accounting entries made in the bankâs books, or general ledger.
A non-performing loan is one that has not made its scheduled payments. When this has continued for a specified number of payment periods (say three months, or six months depending on banking practice in that country) the loan is placed into a âpast-dueâ status. This may signal the start of the formal debt recovery process or this may wait until the next stage, when it becomes a âdelinquent loanâ. A loan is classed as delinquent after a past-due loan continues to miss payments for a further defined period. At this point the loan is effectively frozen on the bankâs books and no further interest accruals can be made to the bankâs income, for example. At this point the loan is taken off the normal loans processing and transferred into a special âregisterâ.
The loan is not necessarily considered to be uncollectable at this point. Any collateral associated with the loan (if any) would have been called. If there were other guarantors of the loan then they would already have been notified and would now be called on to perform their guarantee. Otherwise, professional debt recovery staff or external agencies and lawyers may be tasked with attempting to recover the outstanding amounts.
One way of doing this would be to reach agreement between the bank and the borrower to ârescheduleâ the loan. This may involve re-timing the interest and/or the principal repayments, extending the term or any other arrangement that can be negotiated.Visit at http://www.nationalmanagement.net