Want to know what debt sale is and what it will affect in your life? Let's explain everything about it

Debtors cause a company's capital to be raised. For this, companies usually resort to selling debt acquired by a financial institution. This happens because there is a demand for time for the capital to be stabilized, as well as the corporation's expenses and expenses.

However, many companies seek bank resources to meet this demand, which initially takes longer. Although not the most recommended by experts. Throughout the article we will explain why there are more advantageous options.

The search for this type of resource is to generate liquidity. Thus, causing the risks to decrease, the term of payments to be reduced, in addition to softening the cash flow. For this to happen, companies seek to make securitization and market promotion more popular, known as factoring. 

Although both offer the option of generating liquidity for the company, there is a difference between the two products pursued. In this article, we will talk more specifically about securitization. And, explain everything about the sale of the debt, both for those who buy it - assignor and intermediary - and for the consumer.

A securitizer is a creditor company that offers credit in relation to the purchase of other financial companies. These are companies related to credit, proprietary and financial securities, in which the buyer purchases the negative debt and from there assumes possible risks.

Companies seek the securitization company to obtain conditions such as credit cards, installment plans, loans, checks or even other forms responsible for covering initial service expenses.

This search is due to the lack of capital because the entrepreneur's business is recent. Therefore, not enough income is generated even if expenses are met.

As a result, due to the fact that the securitization loan generates a liability on its balance sheet, companies are increasingly looking for securities of financial assets. This happens because it is more easily transformed into a passive trading title.

In view of this, one of the advantages is the power that financial asset securities have to transform liquidity that would only be redeemed in the future to be converted almost immediately into liquid securities.

These bonds are ready to be passed on to your potential investors. Together with the financial bodies, they start to assume the risks as if they were the assignor company itself. That is, it is the company that will receive the sale of the customer's debt.

In this way, the securitization company has the role of transforming the credit into a kind of commitment to pay investors, businessmen or customers and will pass on the debt amount to it. 

In addition, institutions such as banks, brokerages, securities dealers, investment funds, among others, can also acquire credit quotas.

In the case of individuals, the institution that has an old consumer debt can make the sale. If the owner of the negative CPF pays off the debt, the securitization company that bought the debt will benefit. 

However, if the customer is unable to negotiate the debt, even with discounts and advantages for settlement, the securitization company will end up losing money.

Financial securities are transformed into debt sales so that they can be invested in the capital market. This operation aims to generate capital resources to be used to boost the competitive market, without having to resort to financial loans. 

The option of being able to avoid the financial loan is advantageous, as the loan itself has installments with more expensive interest and fines. In addition, it can compromise the financial balance of the company.

Although much questioned, know that the activity of selling debt is considered legal under the law and even regulated by the Central Bank. However, there are some factors that are added when dealing with a debt sale that can confuse the creditor. 

When it comes to selling debt, the investor has the role of assuming more of the business. This person is responsible for purchasing securities through quotas. In addition, this means that financial companies have the necessary capital and thus be able to make the payment of credit claims. 

Normally, the remainder of this amount is invested in the capital market. In addition, the investor is nothing more than a financial institution transferring the sale of the debt.

The securitization company or any financial agency that buys the debt of other companies is known in the market as an intermediary. The activity is based on the purchase of credit rights, guaranteeing guarantees for the issuance of the famous real estate securities.

The acquisition can still be made through quotas, by individuals or by financial institutions. The values that are accumulated through the sale of quotas, or else through the purchase of credit rights for the company that is carrying out the purchase, receive a capital value that was combined with the sale of these rights.

The company known as the originator is the one where it assigns the debt to another institution. Therefore, it is the one where the creditor's debt originated, or assignor. 

In this case, the originator company sells the debt, such as credit cards, credit cards, checks, loans or bills, and immediately receives capital for the sale. Normally, this amount received by the originating company is smaller compared to if the financial institution had waited for the customer to settle. 

In this way, it is as if the originator is receiving capital immediately. Which is often less than the original value, and leaves the securitization company with a greater value than the creditor would have. However, this will receive the income in the future, if the debt is actually paid off.

The securitization procedure is to unite documents related to receivables from several different companies and transform them into just one single asset. 

Therefore, the practice of selling debt can generate distrust on the part of creditors. This happens due to the fact that consumers make a debt in an originating financial institution and appear, without due prior notification, in another. However, the account being transferred to another is a very common practice, although there are caveats. 

Because it is very popular in the financial market, you need to be careful to avoid falling into fraud or traps. A preventive measure is to get in touch with the financial institution in which your credit was registered and clarify all doubts with them.

In addition, the consumer must be notified when the sale of his debt is purchased by a securitization company. In addition, the consumer may also request proof of credit assignment.

As it is a very common practice between the originator, or assignor, and intermediary, this activity aims to generate financial resources that will be negotiated immediately, transforming future debt into liquidity. 

In this case, the role of the investor, or client, is the person responsible for making the capital market circulate through the practice of requesting the resource and paying it.

Therefore, in the beginning, the relationship between the parties is only one of trust or to ensure that their personal interests are resolved. However, later, it ends up becoming a way to make wealth increase and still be moved.

With that, despite the securitization process benefiting the investor and even the financial institutions themselves, it still causes a cash flow movement. Furthermore, it is a necessary and important practice in the financial market for wealth generation.

Those who believe that this securitization practice does not bring benefits to all parties are mistaken. This happens because it prevents the company from taking out a possible loan, in the case of transferring companies, where they are offered in the banking market at very high rates and that end up compromising their financial health. 

It is worth mentioning that all the following resources are not converted into financial capital that receive immediate liquidity, such as:

The sale of debt by originator and intermediary financial institutions will not affect the consumer's life. On the contrary, it can bring advantages due to the fact that the company offers a much smaller debt compared to the original. Therefore, the purpose of a securitization company is that the consumer actually pays off the debt.

This discount happens because the financial institution has purchased the consumer debt for a lower amount. Therefore, the company will offer more advantageous benefits such as lower installments, lower installment amounts or a good discount for cash payment.

Therefore, after paying the debt, the consumer must have his name removed from the negative list. In addition, it is important to highlight that it is not possible for your name to be “dirty” in two different financial institutions with presentation of the same debt. Question the companies if this happens.

In addition, better known as caducar, the prescription of consumer debt will remain for a period of five years, and may be charged or negotiated after this period. However, without the purpose of negative and disapproval of credit.

Financial companies seek to sell the debt in order to obtain financial resources immediately, without waiting for the customer to pay. 

In addition, the company ends up isolating itself from the risk of non-payment by the consumer, even more so in difficult times of high unemployment rates, where the risk of loss and non-payment is greater. For this reason, companies end up avoiding debts and seeking a securitization company for the sale.

Therefore, this is a risk transfer practice where there is immediate or future liquidity. Therefore, summing up in a clearer way, the company will transfer, even if by receiving a lower amount than the original, the debt to the other and will have its financial resources received immediately. 

The financial institution responsible for intermediating the consumer's debt will buy the risk at a lower price, as long as the negative consumer will pay off the debt. If the customer does not negotiate the debt, the financial institution that made the purchase of the pendency will be at a loss. 

Furthermore, this activity can be pursued by the company where the debt originates as a way to avoid a possible loan. That is, the institution has limited resources and needs a loan immediately. 

However, to avoid high interest rates on bank loans and end up compromising the company's financial health, this administrative institution uses debt sales to obtain market capital.