How to Negotiate a Settlement With a Debt Collector

Negotiating a debt settlement for the first time can be intimidating, especially if you are an unskilled negotiator. To be an effective negotiator, you must maintain your focus, set boundaries and speak with confidence and determination. Before you can start a negotiation, you must first understand what you want from the process. When negotiating a settlement with a debt collector, keep in mind that, although negotiations can be challenging, you can certainly come out on top.

Determine your debt-to-income ratio. Add up all your monthly credit and loan payments. Divide this result by your monthly earned income to determine your debt-to-income ratio. If you have a debt-to-income ratio of 50, then 50 percent of your earned income is available to settle your debt obligation. Subtract additional expenses such as rent, transportation and utilities to see how much income is available after these basic bills are paid.

Contact the debt collector at the telephone number provided on the original collection notice. Provide the number for your collection account and verify your identity with your Social Security number or date of birth as directed. State that you wish to settle the debt.

Start your negotiations lower than your expected settlement offer and build up. For example, offer to pay 10 to 15 percent of the loan amount and work your way up to 50 percent if this is all you can reasonably afford to pay.

Ask the collector to report the debt as “paid in full.” Instruct the collector to remove any negative information about your debt from your credit files. Follow up with your credit reports to be sure this done.

Demand a written agreement based on the terms and conditions outlined during the negotiations. Include standard information such as the settlement amount, the dates of payment and concessions the debt collector has agreed to make regarding how the debt is reported on your credit file.

Review the agreement in its entirety. Contact the collector for changes if the agreement does not reflect the agreed upon terms and conditions.

Sign the agreement once it accurately reflects the terms and conditions of the settlement and mail it back to the debt collector. Make a copy of the agreement for your records before mailing. Confirm with the debt collector that he has received the agreement. Mail your settlement payment by the payment date outlined in the agreement.


  • A consumer law attorney can negotiate a debt settlement on your behalf for a fee.


  • Failure to pay a debt settlement after negotiations can result in a debt-collection lawsuit.