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How Can I Settle a Debt For Less Than The Full Balance?

When you fall into arrears with an account, it seems as though between the interest being charged, the late fees, and any other fees and charges being assessed, the balance on the account just goes up and up.

You may start out owing £1,000, and after a few months the balance may over £1,100 or more.

It can make one feel like they will never get out of debt.

Add to this the collection notices, and calls, it can make for a stressful time.

And collectors and collection agencies know this as well. They want to resolve the situation quickly, get payments coming in for the account(s), and in the end get the account paid in full.

In some instances a collection firm may have purchased the account, they bought the debt, so now they own the debt.

If a bank or lender has a debt/account with a £1,000 balance, they may sell the account for pennies on the pound,, maybe sell it for £500 or less.

The collection firm now owns the debt, and you now owe the collection firm.

When collection companies buy debts in this manner, they want to try and get their money back quickly, and in some instances they may offer the debtor a settlement offer. An offer to pay the debt off in one payment of less than what was originally owed.

If you owe £1,000, the collection firm may send you a one-off settlement offer of £750, or some amount less than the original £1,000 balance on the account.

Settlement offers are a good way to get out of debt, but there are a few caveats to this process.

One is how the account may be reported to the credit bureaus. The account may be reported paid for less than what was owed. Which is not paid as agreed, but the fact is, the account will show a zero balance, which in itself is good.

Settling an Account

Settlement offers on an account can begin in many ways, but usually it is the creditor/bank/lender who initiates the offer.

However, as the account holder or debtor, we can initiate the settlement offer as well. We can speak to a lender and discuss settling the account for less than what is owed. However, we may find it difficult to begin as we may not have any knowledge or experience in this.

Do we starts at 50% of the balance, 75% of the balance???

In most instances, the creditor is going to have that “magic number” of what they will accept as a settlement amount.

Regardless of the amount to pay, there has to be some factors involved.

Need to be in Arrears: The account needs to be in arrears. Why you may ask? A creditor is not going to entertain the thought of getting paid less than the full balance if you are paying on time and not in need of any help.

As to how far in arrears you need to be can vary. In some instances, the longer an account goes unpaid the more a creditor may consider a settlement.

Need the Cash to Pay the Settlement Amount: If you want to settle an account for less than what you owe, you need the money to pay the agreed settlement amount.

If a creditor offers you a settlement deal of £500 for a loan with a balance of £1000, you need to have the £500 to pay the agreed settlement amount.

May be Able to Make 2 or 3 Large Payments: In some instances a creditor may agree on a settlement figure, and allow you to pay the amount in 2 or maybe 3 large payments. This again means you need the funds and ability to pay these payments.

Sometimes a creditor will send out an unsolicited settlement agreement. The creditor may make the offer even without you contacting them to discuss a settlement.

These offers can be a good way to pay off a debt/account, however, once again, you need to have access to the money to pay the settlement amount.

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<strong>What is Our Criteria For Applying?</strong> 
Every lender on our website has their own specific criteria by the basics are mentioned below and you must have a guarantor to be eligible. Simply select the lender of your choice and you will be taken directly to their website where you can apply. You will be required to submit your details including:<li style=”text-align: center;” data-mce-style=”text-align: center;”>Name (must be over 18 as the borrow, 21 or 25 as the guarantor)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Residence (your chances will improve if your guarantor is a homeowner)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Employment status (must be employed or on a pension)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Income (earning at least £600 per month and able to make repayments)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Monthly expenses (not have too many loans open or in major debt)</li>
 
You will then be asked to include the details of your guarantor and as mentioned above, this is usually someone who you know and trust and wants to help you with your personal finances. Ideally, a guarantor with good credit will maximise your chances of being approved based on the idea of ‘if someone with good credit trusts you, well we can too.'<strong>How Much Can I Borrow From Guarantor Loans?</strong>Guarantor Loans gives applicants the chance to borrow £500 to £15,000 depending on the lender. Some lenders we feature like Buddy Loans only have a maximum loan value of £7,500 and TFS Loans is the only lender that stretches up to £15,000.Factors that can influence the amount you can borrow revolve around having a good guarantor. One that is a homeowner, with solid employment, income and good credit rating will maximise your chances of borrowing the largest drawdown possible.The lenders featured on Guarantor Loans see a homeowner as someone who has already gone through the rigorous process of credit checking and affordability and if they can afford a house, they should be able to act as a guarantor for you.By comparison, having a guarantor that is not a homeowner offers slightly less security and means that amount you can borrow is slightly less too.Higher amounts may be available to those who already have a better than average credit rating, are homeowners themselves and a repeat customer with the lender who has already paid their loan on time. To apply directly with your lender of choice see <a href=”https://www.paydaybadcredit.co.uk/direct-lender/” data-mce-href=”https://www.paydaybadcredit.co.uk/direct-lender/”>direct lenders</a>.<strong>What Does The Guarantor Have To Do?</strong>Upon completing an application, the lender will typically send you a <a href=”https://www.handbook.fca.org.uk/handbook/CONC/4/2.html” data-mce-href=”https://www.handbook.fca.org.uk/handbook/CONC/4/2.html”>pre-contract loan agreement</a> and SECCI (Standard European Consumer Credit Information form) which will highlight the terms of your loan. You and your guarantor will be required to review the terms of the loan, including the loan drawdown, fees, repayment dates and responsibilities – and this can be signed via an online verification process using your email and mobile phone.The lender will usually carry out an individual phone call with you and your guarantor to ensure that you both understand the responsibilities and what is required of you – notably that if you cannot make repayment, your guarantor will be required to pay on your behalf. Further to some additional credit and affordability checks, funds can typically be transferred within 24 to 48 hours (or sometimes on the same day).<strong>Are Guarantor Loans Available For Bad Credit Customers?</strong>Yes, even if you have a history of adverse credit, <a href=”https://www.gov.uk/county-court-judgments-ccj-for-debt” data-mce-href=”https://www.gov.uk/county-court-judgments-ccj-for-debt”>CCJs</a>, bankruptcy or IVAs several years ago, you can still be eligible. The idea is that you are using your guarantor and their financial history to ‘back you up’ and give your loan extra security. However, it is noted that your guarantor should have a good credit score and consent to co-signing your loan agreement.<strong>How Soon Can I Receive Funds?</strong>Guarantor Loans works with lenders that can facilitate funds within 24 to 48 hours of approval, or sometimes on the same day.When your funds are successfully transferred, most lenders working with Guarantor Loans will send the full amount to the guarantor’s debit account first. This is a standard security measure carried out by lenders to ensure that the funds are going to the right person and confirms the involvement of the guarantor. The guarantor usually has a ‘two week cooling off period’ where they can decide to pass on the money to the main borrower or they can change their mind and return the funds with no extra charges.