How much should you offer to settle a debt? If you are repaying debt and have suddenly come into some money, you might be wondering if there is a way you can clear your debts in one payment without paying the full amount owed. There is – but how much should you offer to settle a debt in the UK?

What Is Settling a Debt?

Settling a debt is when the person in debt offers a single payment to pay off the debt, which is usually below the total amount owed.

Why Would Creditors Accept Less?

Creditors may accept less than the amount owed to them for a number of reasons. One of the most common is to get near the full amount quickly rather than the debtor using a debt solution which enables them to pay off the debt over many months or even years.

Some debt collection agencies buy debt for well below their value, meaning if you offer less than the money owed, they still make a big profit. 

Who Will Usually try to Settle a Debt?

People that usually try to settle a debt are debtors who have already been paying the debt off gradually. They come into money through inheritance or a change of circumstances that enables them to pay off most of the debt, meaning they can now make a debt settlement offer and become debt-free.

Some people who have just gotten into debt may also make debt settlement offers, but these are less likely to be accepted because if you can pay a big chunk of it straight away, the creditor or collection company will assume you can pay it off anyway (not always the case!).

How Much Should You Offer to Settle a Debt?

How much you offer to settle a debt will depend on your circumstances and what you can afford to repay. The standard amount to aim for is 75% of the debt’s worth. So if you owe £10,000, offering £7,500 might become acceptable. Naturally, the bigger your offer the more chance you have of it being accepted.

How to Make a Settlement Offer?

You can make a settlement offer yourself by calling the creditor or collection agency and asking to discuss a settlement. You can then provide them with a figure that you can pay to get the debt cleared through ‘partial settlement’. It is wise to provide information about why you are offering this and maybe state that this is the maximum you can offer.

Some people get anxious when speaking with creditors or don’t trust their negotiating skills. In these cases, debtors may choose to get someone to offer a debt settlement figure on their behalf. It may be a friend or even a UK debt charity. There are even companies that will provide this service for a fee.

When Should I Pay the Settlement Amount?

It is essential that you do not make the payment before getting it in writing that you have a settlement offer accepted

For example, if you are told over the phone that they will accept your settlement and then pay without written confirmation, the creditor could claim they never formally accepted and the amount you just paid will go towards paying off the debt, but it will not wipe the debt.

Similarly, if you have received a settlement offer acceptance letter make sure you make the payment before any end date that the creditor gives. If you make it after this date it may no longer count as a settlement payment.

Should I Keep Evidence of Payment?

Absolutely. If you have received a settlement confirmation letter, you should keep this and evidence of your payment. This is in case the creditor claims they never agreed to the settlement or that they claim they didn’t receive the payment on time.

How Long Should I Keep My Payment Evidence for?

It is advised to retain any evidence of your settlement, including letters and payment confirmations, for at least six years. This will prevent any accusations that the debt still exists and you owe money. You shouldn’t need to keep evidence longer than six years because unsecured debt at this point becomes legally unenforceable, also known as Statute Barred.

How Does a Settlement Offer Affect My Credit File?

When your creditor agrees to a settlement offer, they mark the credit on your file as partially settled. This means any future creditors you try and borrow from will see that you did not fully repay your debts. This might reduce your chances of getting more credit in the future.

How Long Does Settled Debt Stay on My Credit File?

Your settled debt status will remain on your credit file until it naturally drops off. This means any creditor will be able to see that you had a partially settled debt for six years after it was partially settled.

What If They Don’t Accept My Settlement Offer?

If they don’t accept your settlement offer you might want to make another offer. However, if your previous offer was said to be all you can afford and you now offer more, there is a good chance that the creditor will not believe you. It may or may not harm any future chances of getting a settlement accepted. Sometimes it is better to make your best offer and get the debt over with.

If you have had your maximum settlement offer rejected, you should search for other debt solutions to gradually pay off some of the debt. After so many months of paying part of the debt off, you might want to offer a new settlement figure. Because you’ve already paid off some of the debt, or maybe saved more, you now might have your debt settlement offer accepted.

Although, there is never any guarantees!

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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