Do debt collectors give discounts?
Why do debt collectors settle for less?
If your debt is currently with a debt collector, the debt collector could make you a heavily discounted offer for that debt. Sounds strange, right? Why would you be given a discount when you owe them money? Well, it’s pretty logical once you understand it.
What happens to debt when you default?
If your debt defaults, creditors often end up classifying your debt as ‘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.
How much do debt collectors pay for debt?
Debt collectors are believed to buy debt 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, it's fair to assume that they purchased it 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 sizeable profit.
How much should I settle with a debt collector?
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 the debt collector an offer?
If you’re reading this and the debt collector hasn’t approached you with an offer, you may wish to contact them first. However, this comes with a warning: It 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 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 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 happens.
Remember to read The Real Debt Guy's final thoughts below!
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.
