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Debt solutions

9th January 2022 · 4 minute read

Published by The Real Debt Guy

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Discount debt offer: Make sure the price is right

There was once a lady who reached out to us. She was really struggling with her debt. She had three young children and her debt has been passed to a Debt Collection Agency. However, the Debt Collection Agency had been in touch and they had an offer. It was for a lower amount than the original debt if she could agree to their terms. Was this real? Well, if your debt is currently with a Debt Collector, what could happen is the Debt Collector could make you a discounted offer for that debt. Sounds strange right? Why on earth would you be given a discount, when you owe them money? Well, it’s actually quite logical once you have an understanding.

Anything is a bonus

If your debt becomes defaulted, Creditors often end up classifying your debt as a ‘bad debt’, or a ‘write-off’. Not always, but this does happen. You see, the value of that debt is no longer viewed the same way by the Creditor. That’s because they treat it differently in their financial accounting, it’s lost money to them. Any money they manage to get back is a bonus. That's why debt can end up being sold to a Debt Collector at a reduced rate.

Debt Collectors....We’re in the money

Debt Collectors are believed to buy debt at somewhere between 3-10% of the actual debt value, so that’s around 3p - 10p for every pound of debt!

The Real Debt Guy

You see Debt Collectors are believed to buy debt at somewhere between 3-10% of the actual debt value, so that’s around 3p - 10p for every pound of debt (also see ‘Defaulted debt: will my debt be sold to a Debt Collector' for more on this). If you have £10,000 worth of debt with a Debt Collector, you can assume the Debt Collector purchased it at somewhere between £300 - £1,000. If you then receive an offer of 50% off your debt - reducing it to £5,000 - the Debt Collector is still set to make a profit. A sizeable profit at that!

Get the price right

Once the Debt Collector has contacted you with a discounted offer for your debt, it’s time to get your negotiating boots on. Don’t just accept the first offer. Try to secure between 10-20% of the original debt value. If you get this, you’ve done very well.

Shall I send them an offer?

Now if you’re reading this and you haven’t been approached by the Debt Collector with an offer, you may wish to contact them first. However, this comes with a word of warning. This will put you in a vulnerable situation.

The Debt Collector may see this as a sign that you want to settle and take advantage by refusing to budge on the amount or reducing the debt by a fraction. You could see this as showing your cards and can play into the Debt Collector’s hands.

Always communicate in writing

You’ll see this message throughout our website, it’s one of the most important tips you’ll pick up. Always keep conversations with Debt Collectors in writing. Make sure you get confirmation of the discount offer, in writing.

This includes confirmation that once you have made the payment, the remaining amount will be written off and you will never be chased for the debt again. If you don’t have this written confirmation as evidence, it’s as if there is no agreement and you’re at risk of being chased for the remaining balance. This happens all too often. It’s wrong but it genuinely does happen.

Don't forget to read The Real Debt Guy's final thoughts below!

The information in this article is considered to be true and correct at the date of publication.

The Real Debt Guy's final thoughts.

If the Debt Collector contacts you with a discount offer, great. You’ve got the advantage and there’s definitely some wiggle room to work this in your favour.

Reaching out to the Debt Collector to request a discount is a gamble and not a move to make unless you are prepared to be disappointed. Remember they have the upper hand if you make the first move.

If you can’t agree a suitable settlement amount, the best thing you can do is continue to make the Token Payments you can afford. Don’t enter into a settlement agreement unless you are 100% comfortable with the amount and terms.

Also check out our guide ‘8 Steps to Handle Debt with a Debt Collector’ for more information on dealing with Debt Collectors.

Simplifying complicated matters.

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