Expert Confidential Advice Line 0141 292 6587 | Monday to Sunday, 8am to 8pm
Debt Solutions
- Trust Deed
- Sequestration
- DAS
- Debt Report
Hear how we helped June- Scottish Based Firm
- 5 Local Offices
- Established over 25 Years
- Lower your Monthly Payments
- Write off a Proportion of your Debt
Hear how we helped Chris- Scottish Based Firm
- 5 Local Offices
- Established over 25 Years
- Lower your Monthly Payments
- Write off a Proportion of your Debt
Hear how we helped Jackie- Scottish Based Firm
- 5 Local Offices
- Established over 25 Years
- Lower your Monthly Payments
- Write off a Proportion of your Debt
Get your Free Report- Scottish Based Firm
- 5 Local Offices
- Established over 25 Years
- Lower your Monthly Payments
- Write off a Proportion of your Debt
Debt Problems
- Overdraft Debts
- Council Tax Arrears
- Personal Tax Debts
- Car Payments
- County Court Judgments
- Utility Bills
- Payday Loans
- Other Common Debts
Business Debts
- Administration
- Company Voluntary Arrangement
- Creditors’ Voluntary Liquidation
- HMRC debts
- Members’ Voluntary Liquidation
- Overdrawn Directors’ Loan Accounts
- Winding-up Petition
- Insolvency Practitioners
- News
- Articles
- FAQs
- Sheriff Officers
- Success Stories
- Why SDS?
Contact
- Local Offices
- Home Visits
- About Us
- Reviews
Sharon McDougall - Updated - 30th January 2024 - 5 minutes to read
Sometimes known as a full and final offer, a debt settlement offer is where you agree to make a lump sum payment to your creditors in order to settle the remaining debt you have with them. Often it will be the party that owes the money that will start the negotiations although sometimes creditors make the first move by sending a settlement offer letter with an amount they would be happy to settle for.
You may be tempted to negotiate a full and final (F&F) settlement with your creditors if your circ*mstances have changed and you have found yourself in a much improved financial position. This could be as a result of securing a more stable and better paid job, or alternatively due to a windfall such as an inheritance. If this is the case, tackling your outstanding debts is likely to be high up on your agenda. Despite this, you need to ensure you approach your creditors in the right way in order to get the best deal possible.
Why would a lender accept a settlement offer?
Creditors are not obliged to accept any offer for partial payment; however, many lenders will be open to negotiations in the right circ*mstances.
The first thing to note is that creditors will usually only accept a partial settlement offer on an account which is delinquent - that is one where you have fallen behind on your minimum contractual payments. If your account is up to date then your lender will be less inclined to accept a reduced settlement figure as they would rather you continue to make your monthly payments as usual and pay off the whole balance in the process.
However, if you have defaulted on your accountthen it is likely to be the case that you are paying a nominal sum towards your debt, typically through an informal payment plan. Depending on the sums involved, this could potential mean that it could take several years for you to fully pay back the money you owe. In some instances, a creditor may feel it more beneficial to accept a guaranteed lump sum now and write off the rest, rather than continue to accept the small instalments you are currently making.
By accepting partial payment now and closing your account, creditors are also able to mitigate against the risk of you falling behind in your payments again further down the line should your circ*mstances take a turn for the worse.
Debt Calculator
Get a rough indication of what your monthly repayments might be under each of our different debt solutions.
What percentage of the debt should I offer?
A debt settlement offer is naturally going to be an amount which is lower than the full balance of your debt; however, knowing where to pitch this offer can be tricky. Too high and you will have paid out more than you need to, too low and you face your offer being rejected outright by your lender.
When making an offer your first concern should be ensuring that you have the funds available to stand by the amount you are promising. Remember, you are making an offer based on making an immediate lump sum payment; you are not negotiating a reduction in your debt to be paid off through ongoing monthly instalments.
Secondly, you need to be realistic in what figure is likely to be acceptable to creditors. Depending on how much you owe, your current monthly contributions towards the debt, and the length of time the debt has been held for, you may be able to negotiate a settlement figure of around 30% of the total amount owed. However, some creditors will take a much harsher view and will expect a figure closer to 70%.
Don’t be too disheartened if your first offer is rejected; there is nothing to stop you making another offer, or alternatively your creditor may even respond with a counter-offer of their own. However, if you fail to come to an agreement for a F&F settlement, you may need to consider entering into a formal debt solution such as a Trust Deed or Debt Arrangement Scheme (DAS) to better manage your outstanding debts.
What if I have more than one debt?
If you have more than one debt and are looking to arrange F&F settlements for them all, you will need to ensure you are proposing to split the money you have fairly in order to maximise your chances of success. Creditors are likely to want to see how you have arrived at your proposed settlement figure, so being able to show them your calculations and thereby demonstrate that you are keen on treating them all fairly is likely to work in your favour.
With this said, it is not a requirement that you have to make F&F offers to all creditors. You may decide to enter into negotiations with just one or two; bear in mind that you will still be responsible for paying those debts that you don’t reach a settlement figure for.
A word of warning
Before making the payment ensure you have it in writing that the lump sum you are offering is to be taken as full payment of the debt owed, and confirmation that your account will be closed and your credit reference updated to reflect settlement of the debt once payment is made. While some of the negotiations may be done over the phone, always make sure you have the terms in writing before transferring the lump sum payment.
While negotiating a F&F settlement on your debts can give you a huge amount of peace of mind and sense of accomplishment, you should be aware that not paying the full amount of your debt will have a negative impact on your credit file. Any debt you settle in this way will be reported as ‘partially settled’ on your credit report. This indicates that the debt has been cleared for a lower amount than was due. This will remain on your credit report for six years following the settlement, or the date you defaulted on the account, whichever was first. However, you should not let this put you off approaching lenders for F&F settlements, particularly as it is likely your credit file will already be damaged by this stage anyway.
Next steps
If you are struggling with unmanageable debt, the experts at Scotland Debt Solutions are here to help. We can work alongside you and your creditors to come to a mutually beneficial agreement regarding your debts, allowing you to look forward to a debt-free future. Call our team today on 0800 063 9250 to arrange a completely free consultation at your home or one of our five offices across Scotland.
Sharon McDougall
Manager
Other Articles
Can I borrow money whilst I’m in a Trust Deed?
Can I borrow money whilst I’m in a Trust Deed?
Borrowing money when you’re already deeply in debt requires careful consideration, and consultation with your trustee, as there are various factors associated with further borrowing in this situatio...
Your guide to getting a mortgage after a Trust Deed
Your guide to getting a mortgage after a Trust Deed
If you’re about to be discharged from a Trust Deed, you may be wondering to what extent your ability to obtain a mortgage has been affected.
What is an inhibition court order in Scotland?
What is an inhibition court order in Scotland?
If you’ve lost your job, state benefits and tax credits can provide vital financial support to see you through this tough time and help you avoid taking on too much debt while you look for more work...
About
Why Choose Us
Speak Direct With
A Qualified Adviser
We Don't Operate
Call Centres
5 Offices in Scotland
National Coverage
Ask us About
Home Visits
Fully Regulated Advisors
From a Reputable Firm
Helping Scots Get
Out of Debt Since 1989
We'll give you a call
Our Scottish based team can help advise you on your debt problems.
Tools
Useful Tools
Personalised Debt Report
Personalised Debt Report
Our personalised debt report will help you better understand your financial position and see where your money is going.
Debt ReportInstant Scheduled Call & WhatsApp
Arrange a call with an expert advisor at a time to suit you or contact our team via WhatsApp for immediate help and advice.
Arrange CallbackFind a Local Office
Find a Local Office
We have five offices located across Scotland. Find your nearest one here.
Find an OfficeOUR SERVICES
We can help you with...
Sequestration
Sequestration
Sequestration is the Scottish version of bankruptcy and may be suitable for you if you do not have the money to pay back your debts
Find out MoreTrust Deeds in Scotland
Trust Deeds in Scotland
A Trust Deed involves making a monthly contribution to your debts for up to four years. After this time any remaining debt included in the Trust Deed will not need to be paid.
Find out MoreDebt Arrangement Scheme (DAS)
Debt Arrangement Scheme (DAS)
A Debt Arrangement Scheme (DAS) lets you pay off your debt through a series of manageable instalments over a reasonable length of time.
Find out MoreBusiness Debts
Business Debts
Whether you are a sole trader or a limited company director, we can help you work through your current financial problems including money owed to HMRC
Business DebtsOur Insolvency Practitioners are regulated by ICAS or the IPA and our firm is authorised and regulated by the Financial Conduct Authority
Fees and Information: There are fees associated with our services. These will be fully explained before entering into any of the personal debt solutions referred to on this website. Full details of our fees and how these are charged are fully explained to you prior to you committing to any particular service.
This site uses cookies to monitor site performance and provide a more responsive and personalised experience. You must agree to our use of certain cookies. For more information on how we use and manage cookies please read our PRIVACY POLICY
Close