3 Tips for Settling Debt for Pennies on the Dollar


Credit use is nearly unavoidable in the modern world, whether you just need a solution for emergencies or need a more practical way to make major purchases. Unfortunately, this can make it hard to not only avoid debt but to find yourself fighting an uphill battle to get out of debt. Debt settlement is an option in such cases. In fact, it can be a great way to pay far less than what you owe today. These are three tips a person can use to settle debt for pennies on the dollar.

Settle Your Debt for Less Than What’s Owed

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It’s possible to settle a debt for less than what you owe by approaching creditors and demonstrating that you’re having a hard time paying. This means proving that you’re undergoing a financial hardship.

Financial hardship is simply a situation where a person can’t pay a debt. This is a broad definition, but it can be hard to demonstrate why you can no longer make payments. In addition to meeting this criterion, there are a few other restrictions when it comes to debt settlement. For example:

  • Only certain loans can be negotiated for settlement, such as personal loans, medical bills, and utility bills.
  • You must have the funds available to pay the amount you settle on.
  • You can only negotiate a settlement for a debt that’s past due.

Debt settlement can be complicated in some circumstances, such as in regard to tax issues. You can talk to creditors on your own, but it’s always a better route to contact a debt settlement agency to help you and negotiate with creditors on your behalf.

Negotiate for a Lower Amount

Another hurdle to debt settlement is when your original creditor sells the debt to a collection agency. This can happen whenever your payments fall past due. However, you can still negotiate a settlement — you’ll just have to talk with the collection agency rather than the creditor.

The good news is that creditors and collection agencies dealing with outstanding payments are usually willing to settle a debt. Again, you can call and speak to a creditor on your own or work with a debt settlement agency to help with this process.

Negotiate to Remove Detrimental Marks on Your Credit Score

Settling a debt is better for your credit score than letting a payment to continue going unpaid. It’s especially favorably to going into default or triggering other credit consequences. But it’s still somewhat detrimental to your credit score. The debt will be reported as “settled” on your credit score. However, you can negotiate to have the debt reported as “paid as agreed” instead once you pay the agreed amount.

This is more favorable since it won’t hurt your credit score as much. Also note that your credit will start rebuilding once you bring your accounts current.

Since debt settlement requires having a financial hardship and being behind on payments, it’s not an ideal situation. However, it can be a fantastic way to get out from under a debt for far less than the total you owe. Don’t hesitate to consider this option if you meet these criteria.


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