How Much Will Debt Collectors Settle For? UK Percentages

Dealing with debt collectors can make you feel worried. You might be unsure about how much they will accept to settle your debt.

You’re not alone. Each month, more than 12,000 people visit this website looking for guidance on debt. Like you, they want clear, trustworthy advice.

In this article, we’ll cover:

•  Understanding what a debt settlement offer is and how it works.
•  Learning if you can lower your repayments.
•  Knowing why creditors might accept less.
•  Finding out who usually tries to settle a debt.
•  Working out if you should use a debt settlement agency.

Being in debt can be tough; you might feel scared or unsure. Some of our team have faced these same worries.

Don’t worry; this article will give you the facts you need. So, let’s start making sense of debt collectors and how much they will settle for.

How does a DSO work?

A debt settlement offer is intended to benefit both the debtor and the creditor. 

By offering to pay part of the debt off in a lump sum payment, the creditor receives more of the money back quicker. But in return, any remaining money owed on the debt is written off for good.

Full and final settlement offers can be made to creditors or to debt collection agencies after the collection agency purchased the debt from the original creditor. 

Companies that do this are also called debt-purchasing businesses. They buy debt for less than its value and chase debtors for payment to make a profit. Lowell Debt Collection is a well-known example of a debt collection agency that also operates as a debt purchaser. 

Why would creditors accept less?

You might be wondering why a creditor would be willing to accept less than the total debt owed, and it’s a good question! 

A creditor might be more willing to accept less if it believes you won’t be able to repay the full amount owed in a reasonable time, possibly due to a recent change in personal circumstances. 

The creditor probably won’t want to chase you for payments or take legal action, so they might accept a lesser amount to get as much as possible with fewer issues and recovery costs.

However, credits chasing priority debts might be less agreeable to accept a full and final settlement offer. This is because creditors chasing priority debts typically have an easier time making you pay the full amount.  

Debt purchasing companies are often the most likely to accept a full and final debt settlement offer. These companies purchase the debt for much less than its original value, sometimes as low as 25%. So, they can still make a healthy profit on any reasonable debt settlement offers. 

What percentage of the debt will collectors settle for?

Unless you’re in financial difficulty, debt collectors and creditors will expect you to offer at least 70% of the debt as a lump sum. If you have financial difficulty, you may have a much smaller offer accepted which differs based on individual circumstances. 

Will debt collectors settle for 20%?

The only time a debt collector or creditor will accept 20% of the debt as part of your offer is if you prove you cannot offer any more. Even then, they’re not obligated to accept the debt settlement proposal.

Will debt collectors settle for 30%?

Debt collectors are only likely to accept a 30% debt settlement offer if you’ve proven that this is the best offer you can make and any other creditors have been offered a 30% offer as well. Then again, they’re still not forced to accept. 

Will debt collectors settle for 50%?

It’s possible that a 50% debt settlement offer will be accepted, but only if you show that this is the best offer you can make. But as always, the creditor doesn’t have to accept any debt settlement offer. 

What percentage should I offer to settle debt to multiple creditors?

When making a debt settlement offer on multiple debts, StepChange strongly recommends that you offer to pay the same percentage of the debt to all creditors. 

For example, if you offer to pay 75% of one debt, then you should offer to pay 75% of all the other debts as well. 

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Can I negotiate a debt settlement myself?

Yes, you can negotiate and submit a debt settlement offer yourself. But you can also get advice and support from Citizens Advice and some UK debt charities. 

Benefits of DIY debt settlement

The benefits of doing a DIY debt settlement offer are:

• You don’t have to pay any fees to make your offer
• The process is usually quicker as you don’t need to wait for a consultation etc
• You can still get advice and support from debt charities
• There is no evidence to suggest that using a debt settlement service will always get you a better outcome

Downsides of DIY debt settlement

The downside of a DIY debt settlement offer is that you will have to negotiate directly with all creditors yourself. This can be especially daunting to some people.

Although some debt charities might speak with creditors on your behalf, so there could be a way around this problem. 

» TAKE ACTION NOW: Fill out the short debt form

How to make a settlement offer

When making a debt settlement offer, most debtors have only one thing in mind, which this forum user puts bluntly:

Source: https://forums.moneysavingexpert.com/discussion/comment/67702216#Comment_67702216 

But making the debt settlement offer isn’t just about picking a percentage of the debt you’re willing to pay as a lump sum and hoping the creditor accepts. It’s about showing the creditor that you’re making a reasonable offer based on your financial situation. 

Therefore, when making a settlement offer you should provide the creditor or debt purchaser with a copy of your budget, highlighting income and expenses, including other debts you have to pay. 

They may also request to see evidence, such as a copy of your latest bank statements and recent payslips. 

How likely is it that my offer will be accepted? 

The chances that your debt settlement offer is accepted will depend on:

1. What percentage of the debt you’ve offered to pay as a full and final settlement
2. Whether you’re judged to have made a reasonable offer based on personal circumstances
3. Whether the debt is a priority debt or non-priority debt

The likelihood of the offer being accepted depends on these two things, but also on the creditor or debt purchaser and how they usually handle these offers.

Do creditors have to accept a debt settlement offer?

No, creditors don’t have to accept any debt settlement offer. But they are encouraged to be reasonable.

Do debt purchasers have to accept a debt settlement offer?

Debt purchasing companies don’t have to accept a debt settlement offer, but they’re encouraged to look at offers reasonably. 

When should I pay the settlement amount?

Only pay your lump sum after receiving written confirmation that your debt settlement offer has been accepted. Don’t pay the money if you’ve only been given verbal confirmation.

Without written confirmation that the offer was accepted, the creditor could claim that they never accepted your offer but they might still be able to keep your money as a debt repayment.

This is why it’s so important to get it in writing first!

Is it better to pay in full or offer a settlement?

Using a full and final settlement offer might save you money, but it will also affect your credit rating. 

If you’re not expecting to apply for credit in the following years, including applying for a mortgage, you may be better off using a settlement offer to pay less and clear the debt. But it really depends on individual circumstances. 

Personalised and professional debt advice is recommended. 

» TAKE ACTION NOW: Fill out the short debt form

Should I keep evidence of my lump sum payment?

Yes, always keep evidence of the creditor accepting your debt settlement offer in writing, and keep evidence of your lump sum payment. 

How long should I keep my payment evidence for?

You only need to keep evidence of your payment for six years. But there is no harm in keeping evidence of your payment for as long as possible, 

What happens if a debt settlement offer is rejected?

If your debt settlement offer is rejected, you can return with a better offer immediately or later. 

But this in itself could cause a problem. If you previously stated that the debt settlement offer was your best offer, but then improved the offer quickly after getting the first offer rejected, it may look like you’re not being reasonable. 

It could suggest that you were initially withholding your best offer and therefore lying to the creditor, so they might not be as open to negotiating. 

Instead, you may need to consider one of the many other effective debt solutions, such as a Debt Management Plan (DMP), Debt Relief Order (DRO) or another solution. 

Can I remove settled debts from my credit report?

The quick answer is unfortunately no. Settled debts remain recorded on your credit score, so you won’t be able to have them removed unless there is an error. 

Should I work with a debt settlement agency?

Debt settlement companies are businesses that offer to help people make a full and final settlement offer to creditors. This service is also available through companies called debt management companies. 

You can choose to submit a debt settlement offer using these services, but they usually charge fees. And you might have to pay even if your debt settlement offer is rejected.