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What Percentage Should I Offer to Settle Debt?

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If you’ve considered a debt settlement before, you may be wondering, “What percentage should I offer to settle my debt?” While there is no one-size-fits-all answer to this question, there are a few guidelines that you can follow to help you come up with a number that works for you.

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In light of that, we have created a resource on debt settlement below. Read it over to understand what factors creditors consider when negotiating a debt settlement and what percentage you should offer them.

What is a debt settlement?

Debt settlement generally involves contacting your lenders and asking them to accept a lump-sum payment in exchange for considering your debts settled. Typically, this lump sum payment is worth less than the total debt you currently owe.

Like any other financial decision, the decision to settle your debts comes with its pros and cons. On the one hand, if you choose to settle your debt, there’s a good chance that you will get away with paying less than you owe, and your settled account balances will be brought to zero, which means your creditors will stop calling.

However, on the other hand, it’s important to note that settling your debt will end up on your credit report and can hurt your credit score. Although it is hard to quantify how much of an impact settlement will have, estimates that a debt settlement can lower your credit score by about 100-125 points if you have stellar credit to start. Still, settling your debt will likely have less of a negative impact than leaving your accounts delinquent and possibly facing debt collection or lawsuits from creditors.

What factors are considered when settling debt?

If you’ve gone over the pros and cons of settling your debts and decided that it is the right move for you, the next step is to better understand what factors are considered in a debt settlement. Knowing what matters to your creditors will give you a leg up when deciding how much to offer for your settlement. In light of that, we’ve looked closely at these factors below.

Your overall financial situation

The first thing that a creditor will want to look at when negotiating a debt settlement is the borrower’s overall financial situation. In particular, the creditor will likely want to verify how much cash you have on hand and look at your hardship or what made you need to settle your debts. This is not an easy process, and understanding what to say to a creditor is often best left to those who are experts in settling debt, like a debt solutions attorney.

In this case, the creditor will be more likely to settle for a smaller portion of your debt if you can prove that you are going through a period of financial hardship. Likewise, if it looks like you have plenty of money coming in each month and your debts are mostly the result of extravagances like shopping trips or going out to eat, your creditor will probably be less willing to strike a deal with you.

The age of your debt

Next, creditors are also going to consider the age of your debt. In this case, they are more likely to consider settling older debts. After a certain point, creditors begin to consider old dead uncollectible. If they can collect a portion of that debt through a settlement, in their minds, it will be better than not collecting anything at all.

However, if your debt is relatively new, it’s less likely that your creditors will be willing to accept a settlement. At this point, they are more likely to assume that you will keep making monthly payments to keep your credit score as high as possible. The lender may offer you a payment plan to make partial payments on your debt.

The creditor

It’s also important to take who you are negotiating with into consideration as well. If your debt is less than 180 days past due, you will likely negotiate with your original creditor, such as a credit card company. However, it’s more likely that you will be dealing with a debt collection agency beyond that point. In either case, each entity will likely have its own rules and regulations around settlement negotiations.

With that in mind, it’s a good idea to research who you’ll be negotiating with before you make the call. The Better Business Bureau (BBB) is a good place to gather that information.

There are resources to assist you if this is overwhelming to you, which is understandable since you may not know what to say to a debt collector. Do your research to find what debt solutions might be best to help you achieve your goal of settling your debt.

Note that not all debt can be settled. Each creditor has different rules when settling debts for less than the amount of debt owed. This can confuse the average consumer looking to settle their debt for less than what is owed.

What percentage should I offer to settle debt?

Last, but not least, it’s important to answer the question of how much a debt collector will settle for. While there is no hard and fast rule for debt settlements, the settlement amount is typically based on a percentage of the overall amount you owe. For example, the National Foundation for Credit Counseling (NFCC) reports that the typical credit card debt settlement percentage is worth about 40%-50% of the full amount.

However, the settlement agreement can change and vary depending on the creditor, the type of debt, the total amount you owe, and your circumstances. There is no set amount to settle your debt with collection agencies or debt collection law firms.

Still, it’s crucial to remember that your debt settlement offer is just a starting point when negotiating. No creditor or collection agency is required to settle with you, which means they may come back with a higher number or refuse to settle the debt at all. That’s part of why having a professional in your corner is a good idea as you undertake this process.

The bottom line on settling debt

Settling debt is often thought of as a last resort. However, it is certainly an option worth investigating if you are having trouble keeping up with your debts.

Now that you have a better idea of what percentage a collection agency will settle for, the next step is to figure out whether debt settlement is right for you. You can then decide whether your situation is best left to a financial professional so you can be sure you’re getting the best possible solutions to resolve your debts.

If you are ready to talk to someone about your debt relief options, contact Tayne Law Group today, which has been settling debts for over 20 years and has won many awards. Reach out at (866) 890-7337, or fill out our short contact form, and we’ll respond as soon as possible.


What is a good debt settlement percentage?

A “good” debt settlement percentage could be between 30% and 50% of the original debt. However, this can vary depending on factors such as the debt’s age, the borrower’s payment status, and the creditor’s willingness to negotiate.

How much will creditors negotiate on a debt settlement?

The amount that creditors are willing to negotiate on a debt settlement can vary greatly. Some may be willing to accept as little as 30% of the original debt, while others may demand 70% or more. Factors influencing these decisions include the size and age of the debt, the debtor’s financial situation, and the creditor’s assessment of the likelihood of receiving full payment. Professional assistance from a debt relief lawyer can often help in these negotiations.

Is it better to pay a collection in full or settle for less?

The decision to pay a collection in full or settle for less depends on your individual circumstances. Paying in full will usually positively impact your credit score, as it indicates that you’ve fully met your financial obligation. However, if you’re unable to pay the full amount, settling for less can be a viable strategy. Remember that a settled debt is noted on your credit report and can lower your credit score, but it may still be better than having an unpaid debt.

Does a settlement hurt your credit?

Yes, a settlement can hurt your credit. Settling a debt typically means you’re paying less than the original amount. This can lead to a lower credit score. A settled debt will usually stay on your credit report for seven years from the date the account first became delinquent. However, the impact on your credit score diminishes over time, especially if you work to build good credit.

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