How to Settle a Large Debt Collection

Written By Mary Beth Eastman
Last updated December 8, 2020

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Personal Finance
August 13, 2019

Simple. Thrifty. Living.

Knowing how to negotiate with debt collectors could help you save hundreds or thousands of dollars. Before you struggle to repay the full amount, try these debt negotiation tips to lower your balance.

Debt collectors want you to repay the full amount that you owe because it means they earn larger commissions. A debt collector, in other words, has little incentive to negotiate.

Many of your creditors, however, just want to get paid as much as possible so they don’t have to spend time hassling you. Your creditors may also have more wiggle room that lets them negotiate.

When possible, negotiate with your creditors. You’ll usually get a better deal.

You don’t want to make promises you can’t keep. For example, you shouldn’t agree to repay $10,000 when you know that you don’t have $10,000. Entering an unaffordable arrangement will just prolong your financial issues.

When you know how much you can afford, you can negotiate in good faith. You can’t afford $10,000, but you might have enough money to repay $5,000 or start making monthly payments without interest.

When you start negotiating, offer to repay 30% of the balance. Your creditor probably won’t accept the offer, but you set an expectation that’s much lower than the amount you owe.

Over negotiations, you will probably meet somewhere in the middle. Starting at 30% helps ensure that “the middle” still helps you save a lot of money.

If you’re negotiating with a credit card company, ask them to eliminate your interest payments while you repay your debt. Interest keeps adding to your balance, which makes it harder to repay what you owe.

The credit card company might not eliminate your interest, but it could lower your interest rate considerably. The lower you can get the rate, the easier it gets to repay your debt.

When you reach an agreement with your creditor, make sure the company sends you a document that explains the deal.

Until you have signed documents in your hand, you can’t assume that the company will follow through with the agreement.

Many people settle large debts on their own. If you want help, then you should research debt settlement companies to find an option that works well for you. Read our reviews of the best debt relief services  so you can know which route is best for you. Comparing Freedom Debt Relief with National Debt relief is a good start.

No matter which option you choose, you’ll be well on your way to clearing your debt and getting back on your feet.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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