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What is a partial settlement - Can it help you?
You’ve received an offer to settle your debt with a creditor or debt collector. The offer looks attractive. They’ve decided to remove 70% of the debt. You read through the letter, and it states that they’re willing to accept 30% of the balance as a “Partial Settlement” and write off the remaining.
But what is a Partial Settlement?
Not in the mood to read? We got you covered. You can just listen instead by clicking the YouTube link at the bottom of the page.
Let’s hit the brakes for a minute, as we have to make an important point here. Don’t even consider settling without first reading our article “Why do debt collectors offer discounts?”. This article will give you an understanding of what may be achievable in terms of a debt reduction.
Where were we now? Ah, yes...the partial settlement.
What is a Partial Settlement?
The best way to describe it is to settle a debt for less than the total amount owed on the debt.
Example: The amount owed on the debt is £10,000, and the creditor or debt collector agrees to accept £2,000 to satisfy the debt.
You have not paid the full amount, so it is not classed as a full settlement. You have only paid part of the amount, hence the term “Partial Settlement”.
How does it help you?
Now, that’s a very good question, and it depends on how old your debt is. What do we mean by that?
Well, any negative mark relating to the debt on your credit file disappears six years after it was registered.
Keeping it simple, if you had a default registered on your credit file relating to a debt over six years ago, it will no longer show up on your credit file. Meaning it’s as if it doesn't exist.
Not having it showing automatically helps your credit rating.
Even though the debt is no longer showing on your credit file, it still exists, which is why you may still receive letters regarding it.
However, in a scenario where the debt is still showing on your credit file, and you decide to do a Partial Settlement, it’s down to how the lender sees it.
Is it a glass half full? Meaning that, even though a default is on your credit file, you reached an agreement to settle at a reduced amount.
Is it a glass half empty? You settled at a reduced amount but never paid the full amount back, which might be considered a risk for a lender.
Don't forget 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.
