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Believe it or not, though, it's possible to negotiate with a collection agent and end up paying less than you owe. Why is that? Because the collection agency bought the original debt from your creditor, most likely for a substantial discount. That means they don't have to recover the entire amount to make a profit.

It's better to pay off a debt in full (if you can) than settle. Summary: Ultimately, it's better to pay off a debt in full than settle. This will look better on your credit report and help you avoid a lawsuit. If you can't afford to pay off your debt fully, debt settlement is still a good option.

Offer a Lump-Sum Settlement Some want 75%?80% of what you owe. Others will take 50%, while others might settle for one-third or less. If you can afford it, proposing a lump-sum settlement is generally the best option?and the one most collectors will readily agree to.

Write a debt settlement letter to your creditor. Explain your current situation and how much you can pay upfront. Also, provide them with a clear description of what you expect in return, such as the removal of missed payments or the account shown as paid in full on your report.

Explain your current situation and how much you can pay upfront. Also, provide them with a clear description of what you expect in return, such as the removal of missed payments or the account shown as paid in full on your report. Ask for a written confirmation after settling on an agreement.

Find a number you're comfortable with and say, ?this is what I can afford to give you,? period. They can take or leave it, it's your choice and not theirs.? Oftentimes, debt collectors will agree to accept as payment-in-full a lump-sum amount that is only a fraction of the total debt.

While debt settlement can eliminate outstanding obligations, it can negatively impact your credit score. Stronger credit scores may be more significantly impacted by a debt settlement. The best type of debt to settle is a single large obligation that is one to three years past due.

Contents of a Debt Settlement Agreement Date of the agreement. Name and address of the creditor. Name and address of the debtor. Original loan amount and its date. Rate of interest. Due date of the loan. Final settlement amount. Signatures of both parties.

It is not uncommon to settle debt with a collection agency at 30%-50% of the amount owed. An overall strategy in dealing with collection agencies depends on your circumstances and the practices of the collection agency that bought your debt.

You can hire a debt settlement company who will negotiate with your creditor for a fee, or you can cut out the middleman and do it yourself. Debt settlement is commonly used when the borrower can no longer afford the high interest on credit card debt, coupled with the amount owed.