Are you still chasing payments? Direct debit can turn your loan collections around

As a lender, you’ve probably spent months, maybe years, building relationships, evaluating risks, and finally extending loans to people who need them. But one thing keeps you up at night: ensuring you get paid.

It’s the ultimate goal, the holy grail of lending, yet it’s a challenge that transcends the size of your operation or the years you’ve been in the game. The struggle to collect payments is as old as lending itself.

Throughout history, people have tried everything to get what they’re owed. Some set up complex systems with virtual accounts or issued debit cards, hoping that technology would solve the problem. 

Others resorted to more old-fashioned methods, like banging on doors, demanding payment from borrowers who had long vanished into thin air. But no matter the approach, each method seemed to have a flaw — often more a human issue than a technological one.

Some borrowers can be crafty. They’ll conveniently “forget” to make a transfer, or they’ll cancel their debit cards, leaving you high and dry. Even when you think you’ve got it all figured out, the card networks can fail you, blocking transactions when you need them most. 

It’s no wonder that over 70% of businesses report spending significant time and resources chasing overdue payments, with late payments contributing to 50,000 business failures every year in the UK alone.

The frustration mounts as you wonder if there’s a better way. A way that doesn’t involve chasing payments like a relentless hound.

Enter direct debit. Unlike debit cards, direct debit gives you the power to take payments directly from your customer’s account. It’s not a request; it’s a seamless, automated process that doesn’t rely on your borrower’s memory, honesty, or willingness to comply. 

You don’t need to cancel any cards or delay transfers — just rely on a straightforward way to ensure you get paid. In fact, businesses that switch to direct debit typically see a 76% reduction in late payments. 

So why endure the headache of chasing payments when direct debit can do the hard work for you? If you’re serious about lending, it might just be time to embrace a method that ensures you spend more time building your business and less time worrying about when the money will come in.

Featured read: Why direct debit is the silent hero of loan recovery in Nigeria

Perks of direct debit

Now, let’s talk about the good things about direct debit.

Everyone can do direct debit

One of the most compelling advantages of direct debit is its universal accessibility. Unlike debit cards, which not everyone has—or can use reliably—direct debit is an option for virtually all borrowers. Think about it: not everyone carries a debit card, and even among those who do, not all cards are valid or can be used online. Some cards expire, get lost, or banks simply don’t accept them for certain transactions. But almost everyone has a bank account. This makes direct debit a far more inclusive and reliable method for collecting payments. It levels the playing field, ensuring that every borrower is included, regardless of whether they have the right piece of plastic. When you offer direct debit as a payment option, you’re opening the door to a broader audience, reducing the barriers to timely payments. 

Easy setup

Setting up a direct debit is surprisingly straightforward, and this simplicity is one of its greatest strengths. The process often starts with a direct debit mandate in the form of a transfer of 50 naira from the account intended for payments. This small transfer serves as a check. The direct debit mandate won’t activate if the account lacks sufficient funds or the borrower can’t access it. This means that once set up, you can trust that the account is valid and functional. Once in place, it’s a “set it and forget it” system. This allows lenders and borrowers from the hassles of frequent updates or potential failures.

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Long term validity

Another significant perk of direct debit is its long-term validity. You can set it for an extended period, unlike debit cards that typically expire every few years. At Lendsqr, for example, we recommend setting it for ten years. Once the direct debit is in place, you can reuse it continuously without needing frequent renewals or updates. Additionally, there’s no penalty if there’s no debit on the account due to insufficient funds. Unlike other methods, where a failed payment could lead to complications like a “do not honor” status with banks, direct debit is more forgiving. It waits for funds to become available and makes the payment as soon as possible. This flexibility reduces the stress for borrowers and increases the likelihood of successful, consistent payments for lenders.

Featured read: Handle payment collection like a pro with direct debit

Simplify your loan collections today

As a lender, the best move you can make right now is to set up direct debit. If you’re looking to start using this with Lendsqr, it’s as simple as ABC. The entire industry is transforming, especially with the advancements from NIBSS, making direct debit the go-to solution for loan collections.

How does Lendsqr help you make the most of this? When you set up a direct debit, we continuously ping the account to ensure you collect your payments as soon as funds are available. We take care of the heavy lifting. You focus on what matters most — growing your lending business without the stress of chasing payments. Book a free demo now!