If you want to make debtors pay installments and stick to them; these are 3 things you must add to your settlement agreements:
1. Late Payment Interest
If a debtor knows that a missed payment costs nothing, they’ll push it. Add late payment interest (e.g. 1.5% per month) to put a cost on every delay and to keep urgency alive.
2. Acceleration Clause
Don’t let them default on instalment 2 of 12 and drag you along for months. With an acceleration clause, one missed payment will cause the entire balance to become immediately due. Important to allow you to escalate and claim the entire debt upon default.
3. Post-Dated Cheques
A signed cheque for each instalment reduces the need to chase/remind the debtor; and also acts as solid evidence of a promise to pay (should the need arise). In certain circumstances, bounced cheques can also be evidence suggestive of fraud.
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