Do debt collectors give discounts?

What happens to debt when you default?

If your debt defaults, creditors often categorise it as ‘bad debt’ or a ‘write-off’. The reason is that the debt's value is no longer perceived the same way by the creditor. This is because they account for it differently in their financial records, considering it as a loss. Any amount they recover is considered an additional benefit.

This is why debt is often sold to debt collectors at a discount. Typically, debt collectors buy debt for about 3-20% of its original value, around 3p to 20p per pound owed (see ‘How Debt Collectors Buy Debt in the UK: What You Need to Know' for more details). For example, if you owe £10,000, the collector likely bought it for between £300 and £1,000. If you receive an offer to settle your debt for 50% off, bringing the total down to £5,000, it's important to note that the collector still stands to make a significant profit.

Industry reports confirm that UK debt buyers typically pay about 10–20% of the face value of consumer debt portfolios, depending on the age and type of debt. Older or more difficult-to-collect debts can be acquired for even lower amounts, which explains why collectors prefer lump-sum settlements—they convert these discounts into significant profits.

Why Discounts Make Sense for Debt Collectors

From the collector’s point of view:

• The original creditor has often written the debt down as a loss.
• The collector purchased it at a significant discount, so even a 30–50% settlement would represent a significant profit.
• A lump sum now can be better than years of small, uncertain payments.

Once you see their maths, those “amazing” offers begin to look much less generous and much more like a business model.

How much should I settle with a debt collector?

Once the debt collector contacts you with a discounted offer for your debt, it’s time to put your negotiating skills to work. Don’t simply accept the first offer. Aim to secure a reduction of between 10-20% of the original debt amount. If you achieve this, you’ve done very well.

In practice, what you can achieve depends on factors like:

• the age of the debt,
• whether it has already defaulted and damaged your credit file,
• and how confident the collector is that they could pursue you for more (including through the courts).

The main point: their initial offer is almost never their best. If they’re willing to reduce by 30–50% without much negotiation, there’s usually room to bargain further.

When a Low Settlement Offer Is More Likely

You're more likely to receive a larger discount if:

• you’ve been on low token payments for a long time,
• your income situation is clearly limited,
• or the debt is already several years old and has been passed between different collectors.

That’s because, from their perspective, the likelihood of ever seeing the full balance is slim – so turning “maybe” money into real money today becomes attractive.

Shall I send the debt collector an offer?

If you’re reading this and the debt collector hasn’t approached you with an offer, you might consider contacting them first. However, be warned: this could make you more vulnerable.

The debt collector might interpret this as a sign that you want to settle, and may try to exploit the situation by refusing to budge on the amount or by reducing the debt marginally. You could be perceived as showing your cards, which can play into the debt collector’s hands.

Why Making the First Move Can Backfire

When you approach them first:

• you indicate that you have access to a lump sum,
• you reduce their fear that “this person might never pay”,
• and you give them less incentive to offer a significant discount.

That doesn’t mean you should never make the first move, but you should only do so when:

• you’ve thought through your maximum offer,
• you’re prepared for them to push back hard,
• and you’re willing to walk away and continue with affordable token payments if they don’t accept your offer.

Always communicate in writing

You’ll see this message throughout our website. It’s one of the most important tips you’ll learn: Always keep conversations with debt collectors (and creditors) 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 pursued for the debt again. If you don’t have this written confirmation as proof, it’s as if there is no agreement, and you’re at risk of being pursued for the remaining balance. This happens too often. It’s wrong, but it genuinely occurs.

What Your Settlement Letter Must Include

Before sending any money, you should have a written agreement that clearly states:

• the exact amount you will pay as a full and final settlement,
• that the remaining balance will be written off,
• that neither they nor any other company will chase you for the rest in future,
• and how they will report the account on your credit file (e.g. “partially settled” or “settled”).

Keep copies of:

• their offer,
• your acceptance,
• proof of payment,
• and any follow-up confirmation.

If anything arises years later, that paper trail is your proof.

The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.