How to write a credit card settlement letter

Debt settlement is something many people consider if they are able to offer a lump sum of money up front – usually less than the total amount owed – in the hope the creditor will agree to this and accept the debt as settled.

Doing this means your debt can be removed earlier and that you will no longer need to worry about making repayments.

Below are details on how to write a debt settlement proposal letter, which should include everything you need:

What to consider when writing a debt settlement proposal letter

When proposing a full and final debt settlement to creditors, it’s important you go about this in the right way. This means sending a written letter explaining how you wish to settle your debt, how much you are offering to pay and when this can be paid by.

Your debt settlement proposal letter must be formal and clearly state your intentions, as well as what you expect from your creditors. You should also include all the key information your creditor will need to locate your account on their system, which includes:

  • Your full name used on the account
  • Your full address
  • Any account numbers or reference numbers that are linked to your account

Creditors should be able to use these to find all your relevant information and confirm who you are when they receive your debt settlement proposal.

Debt settlement proposal letter template

For many of us, writing a letter can feel very strange in this digital age – especially when it’s such an important one. To help, we have created an example of a debt settlement proposal letter below that you can use as a guide.

Simply copy and paste this into a Word document and fill out the blank sections or tailor it to suit your needs:

[Name of creditor organisation] [Your name and address]

[Write out creditor’s address]


Account Number: [insert the account number linked to your debt here]

I am writing to you regarding the money you are claiming payment for, on the above account.

I am unable to repay this amount in full due to [explain your current circumstances that prevent you from repaying this debt in full to ensure the creditor understands your situation]

I can instead offer the total amount of £ [insert the amount you are able to pay] as a full and final settlement.

If this is accepted, you agree that you or any associate company can take no further action against myself to enforce or collect this debt and that I will be released from all liability.

Please also confirm that you will also mark my credit reference agency file to show that you have accepted the above amount as the full and final settlement and that the account is closed and paid.

I am able to pay the amount I have offered within [insert length of time within which you can pay] once you have accepted my offer and I have received written agreement of this.

Please confirm where to make payment to.

[Your full name]

This letter clearly states your intentions and what you need the creditor to do. We recommend you follow the same structure or use this as a template if you wish to offer a debt settlement.

If the creditor accepts your offer, ensure this is in writing before you send any money to them. Keep this written confirmation safe too in case there is any dispute in the future, so you can offer this as proof of the agreement.

It’s important to remember that if you settle early on your debt, this means you are not paying it in full and so it will show as partially settled on your credit report instead of settled. This can affect your ability to obtain credit in the future, as it suggests to future creditors that you may not be able to pay back the full amount borrowed.

If you are looking for guidance when dealing with creditors and proposing a debt settlement, our team here at PayPlan can help. Speak to our experts on 0800 280 2816 or use our contact form to get in touch.


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How to write a credit card settlement letter

If your debts are getting you down you may be wondering if a debt settlement is the right move. Settling with your creditors can be a life-changing event, freeing you from debt collectors’ calls and the weight of your unpaid bills. But is writing a debt settlement letter the right move for you? And if so, how do you going about writing a debt settlement letter? Let us explain.

Debt Settlement Basics

A debt settlement is an agreement between a debtor and creditor. Generally, the terms of the debt settlement allow the debtor to pay less than he or she owns. Sometimes the payment will be made in a lump sum. At other times, a debt settlement might include a payment plan that will let the debt meet the terms of the settlement over time.

There are for-profit debt settlement companies that offer consumers help with making debt settlements, but these companies range in quality (some commit outright fraud) and can charge hefty fees. Non-profit credit counselors can also help write debt settlement letters if they deem it appropriate for an individual’s circumstances. You can also write your own debt settlement letter.

When Writing a Debt Settlement Letter Makes Sense

If a debt collector or other creditor is on your case, it’s likely that your creditor is after you for an amount equal to what you owe, plus any interest that has accrued. Your goal in the process of a debt settlement is to agree to pay less than what you owe. You’re trying to pay a low amount and your creditor is trying to get as much out of you as possible.

Ideally, a debt settlement letter would not be the start of your debt settlement negotiation. If you make the first move by sending a debt settlement letter, your creditor can easily come back and ask for more. But if you send your letter only after your creditor has made you an offer, you’ll be in a stronger bargaining position.

What to Put in Your Debt Settlement Letter

With the help of an attorney or, if you’re willing to take on more risk, an online template, you can write a debt settlement letter. You can then your letter to your creditor(s). It’s important to include the facts of your case. These include details such as the credit card number of the card tied to the debt.

Once you’ve introduced yourself and the account in question, you can name your number. You’ll indicate a lump sum that you are willing to pay so long as the creditor considers your debt paid in full. You don’t want to send in a lump sum only to find that the creditor is still coming after you for more money.

Word to the Wise

How to write a credit card settlement letter

After you’ve made your offer you can set up a timeline. This timeline will indicate the number of days that you’ll wait to hear back from your creditor. You want to get it in writing that they are agreeing to accept your lump sum and are pledging to consider your debt paid in full on receipt of that sum. Don’t send a check with your debt settlement letter. It’s best to wait to hear back from your creditor. That way, you have a paper trail in which they agree to settle your debts.

In addition to requesting a response by a certain date, it’s also important to request written confirmation that your check is in your creditors’ hands and that your debt is canceled. Before you close your debt settlement letter, indicate that you want a letter confirming that your debt has been paid.

It’s also wise to request that the creditor update your account status with the credit reporting agencies. Specifically, you want it indicated that the account has been “paid in full” or “closed by request of cardholder.” Without this terminology attached to your account, your credit score could suffer.

Bottom Line

How to write a credit card settlement letter

Sending a debt settlement letter is not a step to take lightly. It’s important to be sure that you can afford to pay the sum you’re offering. It’s also a good idea to approach the debt settlement process as a negotiation between you and your creditor. As in other negotiations, you don’t want to offer more than you need to to close the deal. If you’re successful, you may have tax liability for the amount of your canceled debt.

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Managing debt can be difficult, but when someone falls behind in their credit card payments, it can be a nightmare. Creditors are relentless at attempting to collect debts. They will call all hours of the day and night.

They can call at work and at home and even call references put on an application. Some find that they cannot deal with the constant nagging that is caused by being past due on their debts.

Collection Agency

Once a debt escalates to the 90 to 120 day late range, the company will often send the debt to a third party collection agency.

Collection Agencies Can Be Very Aggressive

These collection agencies can be very aggressive about collection activity. If the debt is more than $300, chances are they are going to head to court. Also, if a debt is above this threshold, they will want to place a judgment to get their money back.

Avoid The Nightmare

With a judgment in hand, they will garnish wages, hit bank accounts and cause your life to be a living nightmare.

However, there is a way to avoid this nightmare and handle past due accounts without the embarrassment. Credit collection agencies know that people don’t have the money to pay off the absorbent fees, so they offer settlements.

miscellaneous fees

The longer an account sits in collection, the more money is owed. They will tack on interest and other miscellaneous fees that are difficult to pay.

There are many debt consolidation companies that will offer you a chance to settle your debt and pay just one small payment a month.

There is no need to enter into such an agreement; you can do it for yourself. By writing a Credit Card Settlement Letter, you can easily negotiate a settlement to end the embarrassing creditor harassment.

Know What You Can Pay

Before beginning this letter, make sure you know what you can pay and what you can’t. Don’t make promises that you can’t keep, this will make the company less likely to work with you in the future.

Make sure you set realistic payments or are ready to put a lump of cash to settle the debt.

Typically, you can get the debt for a half to one third of its original amount, if you have the cash to settle. The older an account is, the more likely the company is not going to collect anything.

Have Cash To Settle?

Most companies are eager to work with someone who says they have cash to settle an account. If they have had a hard time getting a hold of you and have little activity on your account, they will be even more eager to settle.

These companies have guidelines that they must follow to settle the debt. While you may offer $400 on a $1,000 bill, they may not be able to accept that. In a case like this, they may counter offer the debt with a new figure.

When writing the letter, state the low ball figure of what you have. If they think it is all you have, they will be more willing to accept it. Remember going to court and continuing phone calls costs money. Be honest with the company.

Reason Why You Fell Behind

If you have a reason why you fell behind, loss of job or other, be sure to tell them the truth. Companies know how tough the economy is and, they understand and want to help those who make an effort.

Be sure to put lots of information in the letter. The new collection agency probably gave the account a new number, plus it can usually be references by the old number. So, instead of leaving room for error, put as much information about the account down as you know.

Make the offer and be sure to make it a strong one and the company will more than likely be interested. Here is a sample of a credit card debt settlement offer letter.

Sample Credit Card Debt Settlement Offer Letter

February 15, 2021

ABC Credit Corporation
9090 Stone Ridge Blvd.
Reynoldsburg, Ohio 43068

I am writing about an account that is in collection with your company. The account number on my statement is [189478593].

The original creditor was Capitol Credit Cards and the Visa account number for that card was [4419-0389-3894-0987]. The account has not been paid on in almost two years and I want to correct this matter.

When the economy tanked, I lost my job and also suffered from health problems. I didn’t have the money to pay my bills and this account soared from $500 to $2,000 with late fees and interest.

I want to settle the account for the original amount owed $500. I have the money from a small settlement I received from my back. I am unable to return to work, but I still want to make this debt right.

Upon your approval, I will immediately release funds in the amount of [$500] and settle this account. Please contact me if you have any questions. I can be reached during the day at [340-980-7390]. I look forward to resolving this matter.

Our team strives to provide educational content that fully informs readers of all their options as they relate to debt, credit and personal finance. Our goal is to give readers the information they need to make informed financial decisions on their own.

This article contains references that provide sources for the financial data we used. The numbers in brackets [1,2,3] are clickable links to each data source or study referenced.

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How to write a credit card settlement letter

Debt affects Canadians of all age groups and incomes. This is especially true during the COVID-19 pandemic, as Canadians owe a total of $2.3 trillion in debt. Moreover, the average Canadian household debt ratio rose to 176.9% – that means for every dollar a Canadian makes, they owe $1.76 in debt. Some examples of debt include mortgages, credit card debt, and personal loans.

While some debt is normal, excessive debt can hurt your credit score and cause financial stress and insecurity. Luckily, there are many options to settle your debt. One of those options is debt settlement.

Do you need help initiating a debt settlement plan?

Debt settlement is the negotiation process that a borrower or debt settlement company undertakes on behalf of a borrower, to settle debt with creditors. Borrowers that consider debt settlement are usually unable to pay the entirety of their debt themselves. The borrower, or a debt settlement company on behalf of a borrower, proposes an amount to be paid to the creditors as a lump sum payment. The creditors either accept the proposal, negotiate a higher amount, or reject the debt settlement offer completely.

Through this negotiation, the debt settlement company and lenders agree on a lump sum amount to be paid in order to eliminate your debt. The agreed-upon lump sum is usually lower than the total amount of debt owed by a borrower.

Writing the Debt Settlement Proposal Letter

Also known as a debt settlement letter, a debt settlement proposal letter is a document that explains your financial situation to your creditor. It also outlines the amount of money you propose to pay in order to settle your debt. You can either write a debt settlement letter yourself or enlist the services of a debt settlement company to write it for you.

Your debt settlement proposal letter should contain the following:

Your current financial situation

Explain why you’re having trouble paying your debts. Any significant life incidents such as a job loss, environmental disaster, or medical illness are examples of incidents to include in your letter. You can also add any other financial obligations you have, including obligations to any dependents. Be prepared to offer proof, as it’s common for creditors to require it.

Debt settlement offer

This is the proposed amount of money that you are willing to pay to settle your debt. Experts recommend that you start the negotiation at 30% of the debt you owe. It’s likely that your creditors will propose a higher number than your initial proposal; so, make sure you start off with a lower number than what you really want to pay.

Personal information

This letter is similar to a contract. Your creditors cannot share information with third parties without your permission. Feel free to include your full name and account numbers to help your creditors identify your case.

What you expect in return

Add a description of what you would like in return from your creditors. For example, a removal of missed payment history, or documentation of your account appearing paid as full. You should also request a written confirmation of the creditor’s acceptance of your proposal. Never send money without receiving this confirmation, as it acts as liability coverage.

Debt Settlement Proposal Letter Template

Here’s an example of a debt settlement proposal letter:

(First and last name)

(Creditor name and address)

To whom it may concern:

I’m writing this letter to address the debt owed on the account number indicated above. I am unable to pay off this debt in full due to [insert financial situation, life circumstances, and details].

To settle my debt, I propose paying $X as a full and final settlement. In return, I request that you [insert what you’d like in return, i.e. remove late payments from your credit report, document the debt as paid in full].

Please mail me a signed, written agreement if you want to accept my offer. Upon receipt, I will pay $X amount (number proposed) by X date.

Hope to hear from you by X date.

(Insert name and signature)

After Sending a Debt Settlement Proposal Letter

Your creditors might take some time to respond to you. If you still haven’t heard back after a couple of weeks, follow up with them.

Their response will be one of the following:

Acceptance of the proposal

Upon receiving a written confirmation from your creditors, you can send them your proposed lump sum payment.

Acceptance of the proposal upon adjusting (negotiating) the amount to be paid

Your creditor might propose a new amount for you to pay in order to settle your debt.

Rejection of the proposal

Your creditor might reject your proposal entirely, or ask you to pay the rest of your debt in full. If you started the process on your own, you might consider hiring a debt settlement company to act on your behalf at this stage.


Writing a strong debt settlement proposal letter is the first step towards resolving your debt and achieving peace of mind. Remember to consider ways to pay your debt or budget better first before considering debt settlement, as the process leaves a negative mark on your credit report and lowers your credit score. If you’re considering debt settlement, speak to one of our skilled counsellors today.

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If you’re wallowing in debt, sending a debt settlement letter to creditors to lower your amount of debt might work, as it does for many people who want to eliminate debt. See what you can do to put your finances and your life back on track.

by Ronna L. DeLoe, Esq.
updated May 02, 2022 · 4 min read

If you have significant credit card debt, there are several ways you can lower or eliminate it. You can use credit card repair techniques, such as making automatic payments or moving balances from a higher interest credit card to a lower or no interest credit card.

How to write a credit card settlement letter

You also can try debt consolidation or debt management, which require paying what you owe in one combined payment per month, in addition to debt consolidation company or credit counselor fees. Both debt consolidation and debt management have other disadvantages: Many people don’t finish paying according to their arranged plan, which can start the collection process again.

Alternatively, you can try debt settlement, which requires a debt settlement letter and a debt settlement agreement. For some people, debt settlement is preferable to other alternatives.

Overview of Debt Settlement

Debt settlement is where you owe an amount of money to your creditors, usually for credit card debt, and you make an offer to settle your debt for less than you owe. You can send creditors debt settlement negotiation letters, but creditors won’t lower the amount of your debt unless they truly believe:

  • You’re unable to pay.
  • You haven’t paid in awhile.
  • You may file for bankruptcy, which could cancel your debt, if they don’t settle.

Often, you can call creditors yourself and follow up with a debt settlement letter. Your goal is to get a debt settlement agreement with the creditor and to have the debt marked “paid in full.”

Debt Settlement Pros and Cons

You can hire debt settlement companies to negotiate for you, but, in many cases, you won’t save much money because you’re paying the settlement company on top of paying the settled amount of debt. Additionally, just because you hire a debt settlement company doesn’t mean the creditors will actually settle your debts, and many debt settlement companies are fraudulent.

Sometimes using a debt settlement company is problematic because the company advises you to stop paying your creditors and place some of your earnings in a separate account. Only when there’s enough money in the account does the debt settlement company negotiate for you. In addition, while you stopped paying your creditors, you’re likely to get:

  • Collection letters and phone calls
  • Many late fees
  • Higher interest rates on the credit cards
  • A lower credit score
  • Lawsuits by some of the creditors

The good part about debt settlement is that it can prevent bankruptcy, and creditors will stop hounding you once you’ve settled the debt. If you’ve decided to pursue debt settlement, try communicating with your creditors yourself by using a debt settlement letter. If you work out something with your creditors, you’ll have a reduced debt and not owe a debt settlement company a percentage of what they saved you.

Keep in mind, though, that any portion of your debt that is forgiven is considered taxable income to you.

How to Write a Debt Settlement Proposal Letter

If you write the letter yourself, write a debt settlement hardship letter. This type of letter explains that you’re experiencing hardship because of a job loss, high medical bills, insufficient income, divorce, or other dire situation.

Writing a debt settlement letter isn’t difficult, although you can have an attorney prepare one for you. Most debt settlement letters include:

  • The date, name, and address of the credit card company
  • A notation after the address that this is regarding a hardship letter [Re: Hardship]
  • The credit card number and amount of the debt
  • A short statement of your financial situation, why you’re in that situation, and why full payment is a hardship
  • Offering to pay a certain percentage of the entire amount—without offering more than you need to—such as 20% (negotiations start low and have nowhere to go but up)
  • Explaining that you’re trying to avoid bankruptcy, which credit card companies hate
  • That you’re reaching out to all your creditors with the same offer
  • That you’ll start paying once they accept your proposal in writing, stating that they have a certain amount of time to accept
  • That your offer and their acceptance shall be embodied in a debt settlement agreement
  • A request to pay your settled debt in amounts you can handle each month
  • A copy of your monthly income and expenses
  • A request that any agreement be marked “paid in full”

Don’t send any money with your settlement letter, because there’s no guarantee the creditor will accept your terms.

Make sure you get anything that the companies promise you in writing, so that you eventually end up with a debt settlement agreement. A debt settlement agreement is a contract between you and the creditor, whereby the creditor settles the outstanding debt for less than you owe. The agreement contains a structured settlement, where you pay a set amount each month, or it requires a lump sum payment. Get the term “paid in full” in the agreement, along with the creditor’s promise to remove your debt from the credit bureaus.

While debt settlement isn’t right for everyone, it might work for you. If you need assistance with a debt settlement agreement, an online service provider can prepare one for you.

What To Do When a Creditor or Collector Reaches Out

How to write a credit card settlement letter

How to write a credit card settlement letter

How to write a credit card settlement letter

Getting a settlement offer on a debt you couldn’t afford to pay in full may be the perfect opportunity to take care of an old account. You can avoid the anxiety of initiating the conversation with the creditor. Plus, you don’t have to convince the creditor to settle because they’ve already made that decision.

Don’t get too excited about the prospect of finally being rid of this debt, though. Before you pay or even speak to anyone about the settlement (particularly a debt collector), you need to be sure the settlement offer is legitimate.

Consider Important Debt Time Limits

A settlement letter could be a debt collector ploy to get you to make one or more partial payments on a time-barred debt, that is one whose statute of limitations has expired. The payment would restart the statute of limitations, giving the collector more time to sue you for the debt.

Review the statute of limitations for your debt before proceeding to determine whether settling the debt is worth it. If the statute of limitations has expired or is close to expiring, settling the debt may not be worth it.

The credit reporting time limit is also an important consideration for settling debts. If the debt is still being reported on your credit report, the settlement will impact your credit score. There’s less benefit to settling the debts that have fallen off your credit report since the blemish of an unpaid balance no longer exists.

Beware Scam Settlement Offers

It’s important to be on the watch for fake settlement letters, sometimes even for fake debts. Before you pay any money on an unsolicited settlement offer, make sure you’re dealing with a legitimate company and that the debt is yours. Then, you can proceed with payment if that’s the action you want to take.

Spotting a fake settlement offer can be tough. Some signs the letter is not legit include misspelled words, improper grammar, vague references to “our client” or what happens after you settle, the absence of information about discharged debt being reported to the IRS, or directions to pay via wire transfer or another untraceable payment method. Fake settlement offers are more likely to come from collection agencies than from the original creditor.

Two Options for Taking the Settlement Offer

If you receive a settlement offer and decided you’re interested, there are a couple of ways you can respond. You can accept the settlement offer and pay the settlement account in full. This is the easiest and fastest way to deal with the debt, assuming you’ve received a legitimate settlement offer. Read the settlement offer carefully or have an attorney review the offer to be sure it’s legally binding – that the creditor or collector can’t come after you for the remaining balance at some point in the future.

Or, you can even try to negotiate a lower settlement. Your creditor may be willing to accept a lower settlement than the one offered in the letter. Because the door for settling the debt is already opened, you can use this opportunity to see if the creditor is willing to accept a lower payment. You’ll have more leverage in your negotiation if you can pay the amount right away.

Before you make a payment, get the terms of the settlement in writing, on company letterhead with a signature from someone within the company who’s authorized to make this offer to you. Make sure the offer specifies that the remainder of the debt will be canceled after your payment.

If You Don’t Want to Settle

You don’t have to take the offer. Maybe the settlement offer is too high or maybe you’re just not interested in paying off this debt at this time. In either case, you don’t have to respond to an offer you’re not interested in taking.

As long as the debt remains unpaid, creditors or their debt collectors may continue collection efforts including listing the debt on your credit report if it’s within the credit reporting time limit. You can stop communication from a third-party debt collector by sending a written cease-and-desist letter.

Tax Implications of Accepting a Settlement Offer

Note that if more than $600 of the debt is canceled with the settlement, there will be some tax implications for next year’s tax season. You may receive a 1099-C Cancellation of Debt form requiring you to list the canceled debt as income on your tax return. Make sure you include this notice with your other income and expense documents when you visit your tax preparer.

Frequently Asked Questions (FAQs)

What percentage of a debt is typically accepted in a settlement?

The percentage of debt for which you can settle varies by the amount of debt, its age, your income, and the creditor or debt settlement company involved. Debt settlement agreements often range between 30% and 60% of the total amount owed, but there will also be substantial fees on top of that amount.

How do you negotiate a debt settlement?

Just because you’ve determined that a debt is legitimate, it doesn’t mean you have to accept the settlement offer outright. You’re always free to negotiate, but you should be prepared and understand how debt negotiations work before you try it. You may be able to find leverage in the age of your debt or your income. Remember that the collector is simply trying to collect as much of the debt as is realistically possible before the statute of limitations expires.

How long does debt settlement stay on your credit report?

Generally, settled accounts stay on your credit report for seven years after the original date of delinquency. A debt settlement will negatively affect your credit, but not as much as failing to pay the debt will.

Credit cards, when used wisely, work in favour of your finances. To ensure maximum benefits, you must ensure that your credit card usage ties in with what you can afford. This can be hard to resist, given that credit cards boost your purchasing power and also give you access to a whole range of benefits. Depending on the issuer, you may get interest-free borrowing periods, access to unique amenities and so on. However, if you find significant outstanding debt, consider credit card settlement as a last-resort measure.

Read on to know more.

What is a credit card settlement

A settlement is a tactic you can employ when it is challenging to keep up with your credit card dues. This can happen because of a sudden emergency that requires ample financing for a long time or reckless spending. Whatever the reason, the main issue at hand is that your credit card dues will multiply every month and cause severe financial stress. In such a situation, it’s considered a settlement offered by both banks and debt settlement agencies.

Here, you may be advised to either set aside a lump sum and offer it in exchange for a complete waiver or directly appeal for a settlement. Credit card payment settlements are only done in extremely rare cases, and issuers do not encourage it. You should consider a settlement as a last resort, and even then, there is a meagre chance that the issuer will agree to it without you making a lump sum payment. The credit card settlement percentage depends on the issuer and your ability to negotiate.

Does the credit card settlement process affect your credit rating

Credit card debt settlements hurt your credit score almost as much as filing for bankruptcy does. These settlements severely damage your score, and it can take several years to recover from it. This is mainly because your credit history records a settlement as a black mark that can last up to 7 years and hamper subsequent loan applications.

What is the credit card settlement process

Given below is the process to initiate credit card settlements.

  • Visit the issuer or a debt settlement agency
  • Explain your inability to make payments via a credit card settlement letter and mention that you’re open to negotiating other repayment terms
  • Offer a lump sum or inform the issuer of your plans to file for bankruptcy

Following these steps, the issuer may either deny or approve a settlement. If approved, the issuer may offer a repayment plan based on your current income or grant you a temporary forbearance agreement.

Is credit card settlement a good idea

Typically, you’re advised to avoid credit card settlements because of their impact on your credit score. However, depending on your current situation, you may have no other choice but to settle. For this reason, it is important to know how to negotiate credit card debt settlement yourself, as it allows you to approach the issuer and avoids the fees associated with hiring a debt settlement agency.

The bottom line is that to avoid a situation where you need to resort to a settlement, ensure that you spend only what you can afford via your credit card and clear bills on time. Opt for a credit card issuer that allows you to make payments via multiple payment gateways to simplify the latter. The Bajaj Finserv RBL Bank SuperCard is one such option as you can pay using any of the six payment options. Among them is the RBL MyCard app that allows you to pay your bill in just a few taps. Use this feature to ensure that you never miss a credit card payment.

The SuperCard also allows you to benefit from various credit card offers on lifestyle, entertainment and utility purchases. Additionally, you earn reward points on every transaction, facilitating greater savings of up to Rs. 55,000 per year. To avail of all these benefits and more instantly, all you need to do is check your pre-approved offer online. Apply using a customised credit card offering and get quick approval.

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent inaccuracies or typographical errors or delays in updating the information. The material contained in this site, and on associated web pages, is for reference and general information purpose and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. In case any inconsistencies observed, please click on reach us.

If you’re trying to settle credit card debt on your own, use these free settlement templates to get results.

How to write a credit card settlement letter

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When you’re working to settle a debt on your own, you want to do everything in writing. This is especially true if you’re making formal debt settlement agreements. Creditors and collectors will try to get you to agree to things over the phone. Don’t fall for it! Ask them to send you their proposal in writing. Avoid saying anything that acknowledges that you’re obligated to repay the debt. You can use these debt settlement letter templates to negotiate everything in writing.

Always validate a debt before you start negotiating with a collector!

The first step in any debt settlement negotiation with a collection agency is to validate that you owe the debt. When a debt settlement company calls you, ask the representative to send you a letter validating that the debt is yours and that they have a legal right to collect. They have five days to do so under the Fair Debt Collection Practices Act (FDCPA).

The Consumer Financial Protection Bureau provides a detailed free letter template asking a collector for information about the debt. If you receive the letter and believe that you do not owe the debt, then you have 30 days from the date you receive the notification letter to dispute that you owe the debt. The CFPB has a letter for that, too.

Templates are downloadable Word Doc files.

Debt settlement offer letters

Debt settlement offer letter for an original creditor

Use this template letter to make an initial debt settlement offer if the debt is still with the original creditor. It includes a negotiating point requesting to remove any late payments or charge off statuses from your credit report.

Debt settlement offer letter for a collector

This template letter makes an initial debt settlement offer to a third-party debt collector. Use this template if your debt was sold by the original creditor to a collection agency or debt buyer. The offer includes a request for pay for delete.

Debt settlement counteroffer letters

Debt settlement counteroffer for an original creditor

This template letter makes a counteroffer when an original creditor offers you an initial settlement amount. The goal is to offer a lower amount and negotiate for a removal of the negative information from your credit history.

Debt settlement counteroffer for a debt collector

Use this template letter to make a counteroffer to a collector. You goal should be to negotiate a lower amount than what the collector offered initially. It also negotiates for pay for delete, where the creditor agrees to delete the collection account in exchange for your payment.

Settlement of your total payment is done in the following order:

  • – Minimum Amount Due (which is inclusive of all applicable taxes + EMI on Loan plans + 5% of Total Outstanding) / For Corporate Cards – only – Total Amount Due (which is inclusive of all applicable taxes)
  • – Fees & Other Charges
  • – Interest charges
  • – Balance Transfer Outstanding
  • – Retail Outstanding
  • – Cash Advance

Applicable Taxes means:

  • •For the cardholders having state of residence in the records of SBI Card on the statement date as “Haryana” – Central Tax @ 9% and State Tax @ 9%
  • •For the cardholders having state of residence in the records of SBI Card on the statement date as other than “Haryana” – Integrated Tax @ 18%

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Instructions to user:

Step 1: Consider your offer

This letter is intended to settle a dispute where you agree you owe at least some money or have had legal advice that suggests you will have to pay at least some of the money claimed.

  • If you are not sure about whether you owe the debt, get legal advice.
  • It is important that the offer you are making to settle covers the entire dispute. The terms of an offer vary depending on the circumstances. It is strongly recommended that you seek legal advice on the terms of the offer.

Step 2: Find correct address for other party

You will need to look at correspondence from the debt collector (or lender or their solicitors) to find out where to send this letter.

  • If the debt was originally a consumer credit debt (such as a credit card or personal loan) you should send this request to the internal dispute resolution (IDR) contact of the debt collector (or lender).
  • You can get these details from the Australian Financial Complaints Authority (AFCA) ‘find a financial firm’ web page
  • Your debt collector (or your lender if they are chasing their own debt) will usually be required to be a member of this scheme by law if they are collecting a consumer credit debt.
  • If you cannot find the lender or the debt collector in the above search, call AFCA on 1800 931 678 and ask for the IDR contact details of the relevant organisation.

Step 2: Complete the questions below

  • Answer the questions below to customise your letter.
  • Once you have completed the questions click the Preview Letter button below. The letter generator will prompt you if there is missing information.
  • If you realise you need to change your answers, use the Click here to change your selections feature, above or below the previewed letter. Do NOT use the back arrows on the address bar or you will need to start all over again.

Step 3: Copy & Paste the letter into your Email or Word program, and send it!

  • You will need to copy & paste the generated letter into your email or into a Word document in order to send the letter to the other party.
  • Once you have pasted the generated letter into your own email or Word program you can make additional changes to the main text of the letter, however we do not advise deleting any of the legal content that has been automatically generated.

How to write a credit card settlement letter

The only important thing to note about a credit card is that one must use it wisely. Think at least once before you make a spend using your credit card. But why?

Well, not because credit cards are “bad” financial instruments, but because they may give you a handful if you try to use them too much.

The habit of using a credit card is such that you are quite capable of taking the liberty of credit more than you should. From one purchase to the next, credit cards will allow you to buy all that you want but at what cost? It is important to understand that whatever you buy using your credit card today, you must repay tomorrow. And if you go beyond your income, you might fall prey to huge debts, which would eventually get difficult to repay by the day.

Not only the accumulated spent amount, but also the interest amount that gets applied on your unpaid balances- all of it leaves you in huge trouble. Hence, it is better to use this financial instrument wisely, than to regret using it later. Here are a few details on why it is as important as it sounds!

What Credit Card Settlement Means?

Credit card settlement is basically a mutual agreement between the credit card holder and the bank/credit card issuer that helps the credit card holder when it becomes too difficult for him/her to keep up with the credit card dues. This might be because of multiple reasons, from actual financial emergencies to reckless expenses on credit cards. Irrespective of which, the conclusion causes too much burden on the credit card holder, and causes severe financial stress since the debt multiples every month and there seems to be no way out of it.

In such situations of financial panic, a settlement is proposed by the banks/debt settlement agencies between the credit card issuer and the credit card holder. In such cases, the credit card holder is advised to either opt for a lump sum payment in exchange for a complete waiver or directly request for a settlement.

It must be noted that credit card settlement is done in extremely rare cases and the credit card issuers do not encourage it as an option for the debtors. There are minimal chances in which the credit card issuers agree for a settlement, unless you make a lump sum payment. Moreover, the credit card settlement percentage depends on the credit card issuer and your ability to negotiate on the amount.

Does Credit Card Settlement Affect Credit Score?

Since credit card settlements indicate your irresponsible financial behavior, and your inability to manage/repay your credits, it is as bad for your credit score as financial bankruptcy is. Credit card settlement drastically reduces your credit score and hence, almost eliminates your chances of getting any form of credit in your near future. You might need several years to recover from your credit card settlement. This is also majorly because a credit card settlement is recorded as a black mark in your credit history which lasts upto a minimum of 7 years.

How to Go for Credit Card Settlement? The Process

You can initiate credit card settlement by following these steps-

  • Visit a debt settlement agency or reach out to your credit card issuer
  • Briefly explain your inability to repay your credit card bills in a credit card settlement letter
  • Also, mention that you are open to negotiating with other repayment terms in your letter
  • Next, you may offer a lump sum payment to your credit card issuer or else, file for bankruptcy
  • Your issuer may either accept or deny your credit card settlement. If at all, it gets approved, you may be offered a repayment plan on the basis of your current income

Credit Card Settlement – A Good or a Bad Thing to do?

Declaring yourself bankrupt would probably be the last thing you want to do in your lifetime. Credit card settlements are no less. While such settlements may seem to be the last resort in case you have acquired yourself a huge financial burden, you should try to avoid them as much as possible because of their drastic impact on credit score. Hence, even if you opt for such a settlement, you must try your best to negotiate with the credit card issuer yourself, thus avoiding the fees associated with hiring a debt settlement agency.

Alternate Options to Credit Card Settlement

If you still believe that there is a slight chance for you to get out of credit card settlement, you must try to opt for either of these options-

  • Credit Card Balance Transfer

If you have too much unpaid balance on a credit card, you can choose to transfer your balance from one credit card to another. This will help if the other credit card has a lower or no interest rate on the unpaid amount for a predetermined time period (upto 3 months, in most cases). The credit card issuers offer this option and charge interest only after this predetermined interest-free period is over. Hence, this option is suitable only for those credit card holders who can clear their bills within the predetermined time period as offered by the other credit card issuer. Alternatively, for those who cannot repay their bills within the specified time period, some credit card issuers allow users to turn their transferred balance into EMIs.

  • Look out for alternative credit sources

If the credit card debt becomes too much for you to repay in the given time period, you can borrow credit from some other source to pay your credit card bills. You may borrow a personal loan from a bank, get a top-up home loan, or a gold loan to pull yourself out of the credit card debt trap. You may also seek to borrow a loan on a personal level. This would be helpful as the interest rate on the amount borrowed from these sources is relatively lesser and you will get additional time duration to clear off your dues.

How to stay away from such situations?

Follow these instructions to keep away from landing into such situations that may ask you to opt for credit card settlements-

  • Sign up for the auto-pay feature on your credit card’s mobile application/online portal
  • Set up timely reminders for your due dates
  • Pay before time- Do not wait until the last minute to pay your credit card overdue
  • If you are really short of finances, then pay at least the minimum amount due before the last date. The remaining balance can be paid in the interest-free period
  • You may take a personal loan if you have reached a stage where paying your credit card dues does not seem possible to you as these loans have lower interest rates
  • You can request your bank to convert your outstanding balance into easy, affordable EMIs, which you can pay over a specified period of time
  • As an alternate, you may also transfer your credit card balance to another bank’s account and pay the sum through regular EMIs

To Conclude:

All in all, it is best to avoid landing in such a situation where you have even the slightest chance of not being able to repay your credit card bills. It is better to keep yourself away from landing in such situations than to suffer later. Try to make minimum use of your credit card. Even if you use it quite often, ensure that your monthly credit card bill does not exceed your monthly income. Ensure that you spend only on what you can actually afford and keep clearing your bills well in time to maintain a good financial health.

Settling your credit card debt typically means that you negotiate an agreement to repay a portion of your balance, because you are facing hardships that prevent you from repaying the debt in full or if you cannot pay your outstanding balance for other specific reasons. While this can help you better control your finances by reducing the debt you owe, an official debt settlement may affect your credit score.

What is a debt settlement?

Credit card issuers regularly report your payment history to credit agencies each month. Along with each payment record, credit card issuers will update your account condition, which include:

  • “Open” (an open account with an open balance, in good standing);
  • “Paid” (an account with a zero balance);
  • “Settled” (an account that has been legally paid in full for less than the full balance ).

When you work with your creditor to demonstrate hardship (such as loss of job or extended medical leave), they may be willing to develop a settlement agreement. Settlement agreements allow you to pay less than the full balance against the card, but will close the account after that agreed payment has been made.

How debt settlement affects your credit score

Credit scores are generated by the information found in your credit report. When the credit reporting bureaus (TransUnion ® , Equifax ® , and Experian ® ) review your credit report, an account with an account condition of “Settled” may be seen as a negative. A settled account may be seen as proof that you were unable to pay your balance in full. New lenders may look into your full credit report to understand how likely you are to repay any balance they lend to you, so a “Settled” account shows that you were unable to completely repay a balance in the past.

For this reason, while a debt settlement can reduce what you owe and prevent you from using the credit card (limiting your credit expenses), you should expect to see a credit score drop when a debt settlement is officially made. This record of your debt settlement will remain on your credit report for seven years, which can also affect your ability to be approved for loans or new credit lines, and could even be seen as a negative when you apply for a rental home.

How to write a credit card settlement letter

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If you are struggling to make your monthly credit card payment, or can’t catch up with your past-due payments, we may have solutions for you. The sooner you contact us, the sooner we can determine what help may be available. We will review the nature of your hardship and your financial information to determine what payment solutions you may qualify for.

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  • Short-term payment options provide a lower interest rate and a possible lower minimum payment amount.
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What is a credit card settlement process?

When you’re having difficulty keeping up with your credit card balances, the credit card settlement process can sound appealing. Advertisements from credit card debt settlement companies suggest that you can use the credit card settlement process to get out of debt for just pennies on each dollar owed. But like all things that sound too good to be true, there are many potential downsides to credit card settlement that you should be aware of before entering a credit card settlement process.

What is credit card settlement?

The credit card settlement process looks like this:

  1. You stop paying your monthly credit card bills.
  2. The money that you would have paid your creditors goes into a savings account, usually managed by a debt settlement agency.
  3. After several months, when your credit card account is significantly overdue, your settlement agency approaches your credit card company and proposes to settle your debt with a lump sum payment, using the money you saved.
  4. If your creditors accept the credit card lump sum settlement, your debt is erased.
  5. You may have to pay taxes on the money you saved, along with fees to the debt settlement agency.

Does the credit card settlement process work every time?

Sometimes the credit card settlement process is effective, and consumers can settle their debt for anywhere between 25% and 80% of the original amount they owed. But other times, credit card companies may refuse to settle and may take consumers to court instead.

Does the credit card settlement process affect your credit rating?

Because you must stop paying your bills in order to make debt settlement more attractive to your creditors, your credit rating will inevitably be severely damaged. In fact, it may take as long as seven years before you can apply for loans, credit cards, mortgages, and credit.

Consulting a professional about the credit card settlement process.

Before entering a credit card settlement process, it’s a smart idea to get advice from a financial professional or a credit counselor about how to settle credit card debt most effectively. At American Consumer Credit Counseling (ACCC), we offer free credit counseling where you can discuss with a certified counselor your finances, look at all the options available to you, and choose the path out of debt that makes the most sense for you.

Debt management: an alternative to the credit card settlement process.

When consumers want to know how to settle with credit card companies without damaging their credit rating, we typically recommend a debt management program. Debt management involves setting a budget you can live with while you continue to pay down your debt over time. For a small fee, we’ll take responsibility for paying all your bills on time – you just have to make one payment to an account with ACCC each month and we’ll take care of the rest. We’ll also work to seek reductions in interest rates, finance charges, and late fees to help you pay down your debt more quickly.

Contact ACCC for a free credit counseling session, or to learn more about our debt management program.

See what others are saying about us:

I would not have been able to earn my own financial freedom while maintaining my credit score without your program. It has saved my life and my future. I recommend it all the time to people who feel trapped by their credit. Thank you so much!

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Every time I call or email I feel like I’m cared about and issues/questions are instantly resolved. I’ve always experienced kind people with your company. I recommend you guys all the time.

I just want to thank you for your services and assistance. Your agents are knowledgeable and considerate, which is appreciated while paying off debt. I am totally satisfied and would recommend you. Thank you!

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I was pretty anxious going into the process, but my counselor was kind, knowledgeable, and patient. I’m so glad that I called ACCC and didn’t go with the other service!

Kimberly from IL

How to write a credit card settlement letter How to write a credit card settlement letter How to write a credit card settlement letter

American Consumer Credit Counseling (ACCC) is a non-profit Consumer Credit Counseling agency offering free credit counselling and low-cost debt management plans. Our certified credit counselors are highly trained to offer a broad range of consumer credit counseling services that help individuals and families regain control of their finances. As a non-profit debt counseling agency, we offer a Consumer Credit Counseling session free of charge, and we keep our fees for other services as low as possible. When working with consumers on credit card counseling, debt consolidation, or debt management counseling, we also provide access to a wealth of free educational materials and resources on money management skills like budgeting, saving for college and retirement, and achieving financial goals.

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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.

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 circumstances.

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 account then 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 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 circumstances take a turn for the worse.

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.

It may be the best option, but your score will suffer—learn how much

How to write a credit card settlement letter

How to write a credit card settlement letter

How to write a credit card settlement letter

Debt settlement typically has a negative impact on your credit score. How negative depends on many factors: the current condition of your credit, the reporting practices of your creditors, the size of the debts being settled, whether your other debts are in good standing, how much less than the original balance the debt is settled for, and a multitude of other variables.

Key Takeaways

  • While debt settlement can be the best option to eliminate outstanding obligations, it can negatively impact your credit score.
  • Ironically, stronger credit scores get dinged by debt settlement harder than poorer ones.
  • The best sort of debt to settle is a single large obligation that is one to three years past due.
  • Do not attempt to settle a debt at the expense of falling behind on your other obligations.

Why Debt Settlement Can Ding Your Credit Score

Why should it have a negative impact, when you’re lightening the load of your obligations and your creditors are getting some money? Because strong credit scores are designed to reward those accounts that have been paid on time according to the original credit agreement before they’re closed.

A debt settlement plan—in which you agree to pay back a portion of your outstanding debt—modifies or negates the original credit agreement. When the lender closes the account due to a modification to the original contract (as it often does, after the settlement’s complete), your score gets dinged. Other lenders are likely to take notice and be warier about granting credit to you in the future, too.

Still, it is possible that the reduced debt burden is worth a subsequent drop in your credit score. The high credit card account balances and late or missed payments have likely already lowered it somewhat. If debt settlement jump-starts your path toward a sounder financial future, it should be considered.

Let’s examine the process in more detail.

Will Paying Off Old Debt Boost Your Credit Score?

How Debt Settlements Work

As you know, your credit report is a snapshot of your financial past and present. It displays the history of each of your accounts and loans, including the original terms of the loan agreement, the size of your outstanding balance compared with your credit limit, and whether payments were timely or skipped. Each late payment is recorded.

You can negotiate a debt settlement arrangement directly with your lender or seek the help of a debt settlement company. Through either route, you make an agreement to pay back just a portion of the outstanding debt. If the lender agrees, your debt is reported to the credit bureaus as “paid-settled.”

While this is better for your report than a charge-off—it may even have a slightly positive impact if it erases severe delinquency—it does not bear the same meaning as a rating that indicates that the debt was “paid as agreed.”

The best-case scenario is to negotiate with your creditor ahead of time to have the account reported as “paid in full” (even if that’s not the case). This does not hurt your credit score as much.

What Sort of Debt Should I Settle?

Since most creditors are unwilling to settle debts that are current and serviced with timely payments, you’re better off trying to work out a deal for older, seriously past-due debt, perhaps something that’s already been turned over to a collections department. It sounds counter-intuitive, but generally, your credit score drops less as you become more delinquent in your payments.

However, bear in mind that, if you have an outstanding debt that was sent to collectors more than three years ago, paying it off through a debt settlement could reactivate the debt and cause it to show as a current collection. Be sure to get this straight with your creditor before finalizing any agreement.

A debt settlement remains on your credit report for seven years.  

As with all debts, larger balances have a proportionately larger impact on your credit score. If you are settling small accounts—particularly if you are current on other, bigger loans—then the impact of a debt settlement may be negligible. Also, settling multiple accounts hurts your score more than settling just one.

Debt Settlement vs. Staying Current

In your credit history, the most weight is given to payment history, with current accounts having the most impact.   If you are behind on other debts, it is important to try first to keep a newer, current account in good standing before attempting to rectify the situation of a long-overdue account.

For example, if you have an auto loan, a mortgage, and three credit cards, and one of those is over 90 days past due, do not attempt to settle that debt at the expense of falling behind on the other obligations. One unpaid account is better than having late payments on multiple accounts.

The average amount of savings a consumer sees after debt settlement, according to the American Fair Credit Council.  

This is also going to sound counterintuitive, but the stronger your credit score before you negotiate a debt settlement, the greater the drop. The Fair Isaac Corporation, the group behind the FICO score (the most common type of credit score) gives a scenario in which a person with a 680 credit score (who already has one late payment on the credit card) would lose between 45 and 65 points after debt settlement for one credit card, while a person with a 780 credit score (with no other late payments) would lose between 140 and 160 points.  

The Bottom Line

Facing past due debt can be scary, and you may feel like doing anything you can to get out of it. In this situation, a debt settlement arrangement seems like an attractive option. From the lender’s perspective, arranging for payment of some, but not all, of the outstanding debt can be better than receiving none. For you, a debt settlement packs a punch against your credit report, but it can let you resolve things and rebuild.

Consider the opportunity cost of not settling your debt. If you do not settle, then your score is not hurt right away. However, not settling might lead to continued late payments, going into default, and credit-agency collection attempts. These scenarios may end up hurting your score more in the long run. Sometimes, debt relief is the best option, but a clean slate is almost always good.

Think about taxes. The IRS usually considers canceled or forgiven debt as taxable income.   Check with your tax advisor about any possible tax implications of making a debt settlement.

Debt settlement occurs when a debtor successfully negotiates a payoff amount for less than the total balance owed on a debt. This lower negotiated amount is agreed to by the creditor or collection agency and must be fully documented in writing. The settlement is often paid off in one lump sum, although it can also be paid off over time.

Although creditors are under no legal obligation to accept debt settlement offers, negotiating and paying lower amounts to settle debts is far more common than many people realize. For those individuals who wish to pursue debt settlement on their own, without the aid of an experienced debt settlement company, contacting creditors with a carefully crafted debt settlement proposal letter is an absolute must. Fortunately, the debt settlement experts at United Settlement can help you write an effective debt settlement proposal letter.

How To Write a Debt Settlement Proposal Letter

A successful debt settlement negotiation can save you thousands of dollars while relieving the burden of debt and its accompanying process of ongoing monthly repayments. With a lot riding on effective negotiation, you will want to do everything within your power to get things off on the right foot and to generate positive momentum for yourself in the direction of a money-saving and aggravation relieving settlement.

Therefore, when proposing a full and final settlement offer to a creditor, it’s important to be thorough in conveying exactly how much you offer to pay, exactly when you offer to have it paid, and the concessions you want your creditor to grant. It is also very important to explain to the creditor the nature of your current circumstances (employment-related, health-related, family-related) and how they financially impact you, your cash flow, your necessary expenses, and your ability to pay the debt in full. Clearly state your intentions to pay a suggested settled amount in a formal manner while including all identifying information so as to make your account easily accessible for your creditor. Include your full name as stated on the account, your full address, account number, and any other identifying reference numbers (including those related to collection attempts) that are associated with your account.

If the creditor ultimately accepts your offer for debt settlement, make certain that the acceptance is made in writing prior to sending the creditor any amount of money. A written acceptance will serve as confirmation in the event that there are any future disputes. It is also important to understand that the nature of a negotiated debt settlement implies that you will have paid less than the full amount of the debt, and that the settled account is likely to be marked on your credit report as “settled,” as opposed to “paid in full.” However, you can still request that your account be denoted as “paid in full” on your credit report. Accounts marked as “settled” will remain on a credit report for seven years, and often have a detrimental impact on a credit score and profile.

Sample Debt Settlement Proposal Letter

Your debt settlement proposal letter should be formatted as a formal business letter, with your name and complete mailing address in the top left corner of the page, followed by a blank line, your account number, another blank line, and the date listed beneath it.

After another blank line comes the full name and address of the creditor organization. After another blank line, you can begin the actual text of the debt settlement proposal letter.

Please see below a sample Debt Settlement Proposal Letter.

Sample Debt Settlement Letter

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To learn more about debt settlement or to schedule a free consultation, please contact us online or call us today at 888-574-5454.

ICICI Bank Debt Service looks into servicing existing customers of ICICI Bank who are unable to pay their credit card or loan dues in time.

The customers are serviced by empanelled channel partners of ICICI Bank.

The channel partners as well as the bank employees servicing the customer ensure that their interactions are in line with Bank’s philosophy of ‘Khayaal Aapka’. ICICI Bank has taken multiple initiatives for helping the customers to regularise their payments.

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This is an initiative of the bank for the customers who are interested to pay their overdue or waived amount of their previous settlement to improve their Credit Score which is an important parameter referred by financial institutions while extending the new credit facility to any customer.

In this programme, the customer makes the payment for overdue or waived amount of his past settled credit relationship from ICICI Bank and then apply to get a new secured Credit Card from ICICI Bank against a Fixed Deposit. As the customer starts using the new credit card and pay the dues on time, the credit score will improve gradually.

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How to write a credit card settlement letter

This is a joint initiative of ICICI Bank with CIBIL and CRISIL. This programme intends to educate the customers on importance of credit track record for future borrowing. In this programme, sessions are organised by the bank where the customer queries related to credit worthiness are addressed. The customers also get Insights from CIBIL enabling them to increase their preparation for business opportunities in future. This campaign has been successfully conducted in several cities across India.


How to write a credit card settlement letter

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Debt settlement helps you reduce debt by paying a fraction of your total balance. Learn more about how it works, its impact on your credit score, and its risks.

By Megan Doyle | American Express Credit Intel Freelance Contributor

7 Min Read | January 17, 2020 in Money

How to write a credit card settlement letter



Debt settlement is a way for consumers to reduce debt by paying a fraction of their total balance.

Consumers can use a debt settlement company, or negotiate directly with their creditor.

Debt settlement will almost always have a negative impact on your credit score.

The number of Americans having a hard time keeping up with debt payments is increasing, according to a 2019 report by the Federal Reserve Bank of New York. 1 Moreover, the trend appears to be growing faster for those in their 20s: the same report found that about 9% of credit card balances for people aged 18-29 were seriously delinquent (90+ days) as of the second quarter of 2019.

This trend can be particularly troubling for young people, since credit score damage from delinquencies can make it harder to take out mortgages or other loans in the future. But there are many ways young Americans can start managing their debt. One option is debt settlement—though it comes with risks.

What is Debt Settlement?

Debt settlement is a debt reduction method in which the credit issuer allows a person to pay off their debt for less than the original balance owed, typically in the form of a lump-sum. 2 How much a creditor will settle for depends on several factors, including your overall balance and financial situation, but it typically ranges between 30% and 60% of your outstanding balance.

For example, if you owe $10,000 on a single credit card, you may be able to reach a settlement with your credit card company to pay only $6,000, or 60% of your outstanding debt. In exchange for your one-time payment of $6,000, the credit card company will forgive the remaining $4,000. 3

But a creditor won’t likely accept a debt settlement if they believe you could pay the full amount—otherwise, why would they settle for less? In other words, a creditor is only likely to approve a debt settlement proposal if they fear you may not be able to pay the balance at all. 4

Using a ‘Professional’ Debt Settlement Company vs Doing it Yourself

A debt settlement or debt relief company will attempt to negotiate with your creditors to accept a lump-sum payment for less than your original balance. To build that lump sum, you’ll probably have to make monthly deposits into a savings account held by the debt settlement company. Meanwhile, they’ll likely advise you to stop paying your creditors to improve the chance of your settlement being approved—a high-risk move that could have negative consequences.

Debt settlement companies might seem like the easy way out, but experts say they’re not always a good idea. According to the U.S. Consumer Financial Protection Bureau (CFPB), debt settlement programs are notorious for offering unsound financial advice, being expensive, and risky. 5 What’s more, the Federal Trade Commission (FTC) says many consumers drop out of debt settlement programs without settling their debts. 6 For more information about debt settlement companies, see “Are Debt Relief Programs Too Good to Be True?”

Arranging a do-it-yourself debt settlement with a creditor might take a little bit more time and effort, but it’s also less risky and you won’t have to pay for someone else’s services—and that savings can make a big difference if you’re deep in debt. But still, there’s no guarantee that your debt settlement will be approved. If all else fails, you can try to arrange a modified payment plan to reduce your monthly payments.

How to Negotiate Debt Settlement Yourself

Here are the steps experts recommend to negotiate a debt settlement on yourself:

  1. Learn about and understand your debt. First, figure out if you’re a good candidate—do you have delinquent payments that you’re truly unable to pay off, or can you manage to pay off your debts in full? Paying in full is always best since it will leave your credit in better standing (more on that later), but it isn’t always possible. If your finances are deep in the red, debt settlement might be a viable option. 7
  2. Create a realistic repayment or settlement proposal. Create a budget to determine how much you can pay. Although debts are typically settled as a percentage of the total balance owed, it can help to have a good idea of a concrete dollar amount. It can also help to keep track of your debts so you can better explain your situation. 8 But beware: if the amount forgiven is $600 or more, you’ll have to pay taxes on it as if it were income—which, in a sense, it is. 9
  3. Present your proposal to your creditor and negotiate. Negotiation will likely require persistence and persuasion. It might even take more than one call. Experts recommend having a clear, concise narrative when explaining your financial hardship—and don’t forget to be polite! 10
  4. Finalize the deal and commit! If you and your creditor come to an agreement, get the terms of the settlement in writing. This way, you can hold each other accountable. 11 Then, all that’s left to do is commit, and follow through.

Debt Settlement Can Hurt Your Credit Score

Whether you do it yourself or use a debt settlement company, debt settlement can negatively impact your credit score. Exactly how much depends on factors like the current condition of your credit and the size of the debts being settled. 12

When the debt is settled, your creditor will likely send an update to your credit report to show a status of “Settled.” While experts say a “Settled” status is better than seeing “Unpaid” on your credit report, any payment status other than “Paid in Full” can hurt your credit. 13 What’s more, debt settlement will stay on your credit report for seven years. 14

Given the Risks, is Debt Settlement a Bad Idea?

If debt settlement companies can be risky, and even DIY debt settlement can hurt your credit score, you may be wondering if debt settlement is even worth it. Like all things finance, it depends! On one hand, taking a debt settlement is better than having unpaid debts. But it can also have negative consequences. In the end, you have to weigh the situation on your own and figure out if debt settlement is a better alternative to debt consolidation, enrolling in a debt management program, or filing for bankruptcy.

The Takeaway

Debt settlement means your creditor will allow you to settle your debt for less than your outstanding balance. Unfortunately, it’s not as easy—or safe—as it sounds. Negotiating with your creditor can take a lot of time and effort, whereas debt settlement companies can be risky and expensive. What’s more, debt settlement will likely damage your credit score. Regardless, debt settlement might still be the right debt-reduction method depending on your financial situation.

Show Article Sources

6 “Settling Credit Card Debt,” Federal Trade Commission

8 “Settling Credit Card Debt,” Federal Trade Commission

Updated on : Jan 07, 2022 – 09:57:22 AM

‘Loan settlement’ is a term that is often mistaken for ‘loan closure’. However, they are not the same. If you pay off all your monthly instalments on time and complete repayments as scheduled, the lender will close the loan account; this is termed as ‘loan closure’.

The same information will be sent to credit rating agencies and it may have a positive impact on your score as you have successfully paid the loan off. Read on to know how the above scenario is different from loan settlement and its effects on your credit score.

What does loan settlement mean?

The meaning of loan settlement is explained with a scenario where you have taken a loan from a lender. Now, you are genuinely unable to make repayments due to an illness, injury, job loss, or some other reason. In this case, you inform the lender of your situation and request them to give you some time off before you begin repayments.

The lender may give you a one-time settlement option where you take some time off and then, settle the loan in one go. Since you are given some time, you may readily accept this offer. Upon settling the loan in one go later, the status of this loan will be recorded as ‘settled’ in the credit report.

How does a lender process this?

If the lender is convinced that your reason for non-payment is genuine, he may consider offering a 6-month non-repayment period. This option will be offered only if you agree to settle the loan in one payment. The lender will write off a certain amount so that it is easier for the borrower to settle up the loan.

The amount that will be written off depends on the severity of the scenario and the repayment capabilities of the borrower. Due to this agreement for an amount lower than the actual outstanding amount, the status of the loan will be marked ‘settled’. In contrast, if the borrower had paid the outstanding balance completely, the status of the loan would be recorded as ‘closed’.

How does loan settlement impact your credit score?

Whenever a lender decides to write off a loan, he immediately informs the case to CIBIL and other rating agencies. Though the loan transaction comes to an end in the form of settlement, it is still not a usual closure. Therefore, credit rating agencies term the transaction as ‘settled’ making other lenders view it as a negative credit behaviour.

In turn, the borrower’s credit score drops. In addition, these agencies hold on to this information for about seven years. If the borrower wishes to take another loan during this period, lenders may get wary of the repayment capability of the borrower. There are possibilities for lenders to reject the loan application as well.

How can borrowers deal with this?

Borrowers see the loan write-off as an opportunity to pay less for the closure of the loan account. However, most borrowers are not aware of the inner calculations and consequences of such a settlement. One wrong step may bother borrowers for about seven years i.e. as long as credit rating agencies hold the information in their repository. Until and unless you don’t have a bother option, do not get swayed by the one-time loan settlement option offered by lenders.

If possible, choose to liquidate your savings or investments to pay off the outstanding loan amount in full. Think of any other possible methods to raise money enough to close the loan account. It is recommended to consider ‘settlement’ as the last resort. In addition, you can try requesting the lender to extend your repayment term, re-evaluate the monthly instalment structure so it is easier for you to make monthly payments, reduce the interest rate, or at least waive off the interest for as long as possible.

Once you strike a deal with the lender, make sure to verify the changes that happen on your credit report and credit score. Maintain a good credit score and behaviour, and try to make up for any dip in your score. To further avoid such situations, you can go for a secured loan rather than an unsecured one so the lender will not have to be wary of your repayment capabilities.

Alternatively, you can also take an insurance policy against the loan. In this case, even if you come across a tough situation where you cannot repay, the insurance does the needful for you. Therefore, you will not default on payments and it won’t affect your credit score.

4 Mins May 15, 2020

Umang Raheja (name changed) a 35-year-old software professional, had taken a personal loan of Rs 5 lakh to repair and refurbish his house five years ago. However soon after that he lost his job and was unemployed for a few months. During this period his father underwent emergency surgery. Umang was forced to dip into his savings for the medical expenses as well as for the regular household expenses. When he finally got another job, it was at a much lower salary. As he was unable to repay his personal loan due to his financial troubles, the interest payment and late payment fees added up. As Umang was unable to afford the EMI on his new salary, he decided to go for a ‘One Time Settlement’ of the loan with his bank.

How to write a credit card settlement letter

Last year, Umang applied for a new credit card, but it was turned down. It was then that he realised the negative impact of the loan settlement on his credit score and credit record. Let us see what loan settlement means and under what circumstances you should go for it.

What is loan settlement

  • A One Time Loan settlement is when the lender agrees to accept a lesser amount than the entire amount that is due and agrees to waive off or write off the rest of the amount.
  • The bank may agree to this under certain circumstances and if the reason is genuine, such as job loss or a medical emergency, etc.
  • The bank may allow the settlement only after a certain period, say one year.
  • The bank will close the loan in its books and the borrower will no longer be a loan customer for the bank.

What it means for the borrower

  • In the bank’s records the status of the loan is closed, but in the credit bureaus’ records the status of the loan is ‘settled’.
  • As against a ‘closed’ loan, a ‘settled’ loan is considered as negative behaviour by credit bureaus. This is because in case of a ‘loan closure’ the borrower repays the full amount, while in case of ‘loan settlement’ the borrower pays only a part of the amount.
  • This will bring down your credit score and adversely impact your credit history. It takes up to seven years for a negative remark to be cleared off from an individual’s credit history.
  • It could be tough for you to borrow in future if you have settled a loan in the past. Often you may not even realise this until you apply for a new loan or credit card.

What should you do

  • Try to repay the loan as far as possible. Request your bank to extend your loan tenure or opt for debt consolidation, where you can transfer your loan to another loan with a lower interest rate. Or liquidate some investment (FD, MF) or pledge financial assets (Gold/MFs/Insurance/Stocks) and take a secured loan at a lower rate.
  • If you have no option but to go for a One Time Settlement then ensure that till your credit score is restored, you don’t apply for a new loan. Every loan/credit application you make and gets rejected has a further negative impact on your credit score.
  • Build up your savings so that in case of an emergency, such as job loss, you have enough funds to cover your EMIs. This will help avoid negative remarks in your credit record.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.

How to write a credit card settlement letter


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A healthy CIBIL report and score increases one’s chances of getting a loan. Research data based on CIBIL (Credit Information Bureau (India) Limited) data analysis indicates that 79% of loans and credit cards were approved for individuals who had a credit score of 750 and above.

The first step towards developing a healthy CIBIL report is to understand its contents. One of the most important elements of the credit report is the “Accounts” section. This section contains the details of all the loans and credit cards you have availed including name of lenders, type of credit facilities (home, auto, personal, overdraft, etc.), account numbers, ownership details, date opened, date of last payment, loan amount, current balance and a month on month record (of up to 3 years) of your payments. This section also provides “Status” on the account which defines the “health” of the account. Explained here are some common status flags that can occur on an individual’s credit report and what they mean:

Closed: If you find a date adjacent to the ‘Closed’ field in your account section, this means that that loan account has been closed by the lender. In other words, it means you have paid off your loan in full and the bank has reported this account as “Closed” to CIBIL.

After closing a loan it is important to obtain a No Dues Certificate (NDC) from the lender, banks issue a No Due Certificate (NDC) or Closure Letter while closing loans stating that the loan stands closed and then report it as “closed” on your CIBIL Report.

Settled: If you have partly paid the dues and settled a loan or credit card then the status will reflect as “Settled” in your credit report. When you settle an account, it means that the credit institution is agreeing to accept a payoff amount that is less than the amount originally owed. Because the lending institution is taking a loss, a status of “settled” may be considered potentially negative and detrimental to the chances of loan approval.

It is important to understand that though there will be no impact of the “settlement” flag on your CIBIL TransUnion Score, your credit history will show a “Settled” status in your CIBIL Report and there will be Days-Past-Due reflecting on the report since the payment on the loan has not been timely. Each bank has its own policy of viewing a “Settled” status and will decide on your future loan applications accordingly.

Written Off: When you are not able to make payments against the outstanding loan/credit card amount for more than 180 days, the lender is required to “write-off” the amount in question. The lender then proceeds to report this on your CIBIL Report as “Written off”. This is a detrimental status for the approval of your loan or credit card applications as the lender may not want to provide a loan or credit card to someone who has not paid dues on past loans or credit cards.

If the CIBIL Report shows a “settled” or “written off” status, then it may get difficult for the individual to obtain a loan.

Understanding the elements of your credit history and then working on them to build a good CIBIL report and score will help make you “Finance ready”.

CIBIL report subscription is priced between Rs 550 to Rs 1200 for individuals depending on the number of reports delivered. For institutions, CIBIL charges a flat Rs 3000 each time a company requests for the report and score.

(By Harshala Chandorkar, Chief Operating Officer, CIBIL)

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It’s always nice to have a credit card due to the wide range of avenues that it brings from online shopping to paying your utility bills. But so often does the case of overspending arises on the lure of the plastic money. The convenience that credit card brings invariably makes an individual to splurge around. But there comes a time when it becomes difficult to cope with the bills and one starts defaulting on the payment of bills and ends up going absolutely nowhere. Have you also get caught in the credit card debt trap? Are you struggling to pay the mounting bills? Do you receive constant phone calls from the debt recovery agents to pay the bills quickly? Do you want to move away from the credit card life? But don’t know how to negotiate and settle credit card debt with the bank? Then, you must read this article and know how you can negotiate on your credit card debt.

Steps for credit card debt settlement

  • Give a call to the customer care of the credit card issuing bank and request them to send all your monthly statements, including your payments till now, to your e-mail ID.
  • Subsequent to receiving the statements, checking the payment details like how much you have paid, the interest charged by the bank and the total outstanding amount so far.
  • Deduct the amount paid from the total outstanding. Afterwards calculate the interest and if it seems much more than it should be. Then, you can talk to the bank for reducing it. You must take bank into confidence that you will be paying the bill. But tell them that it would be comfortable to you if the interest amount being charged gets reduced. Depending upon how strongly you put forth your words, bank can get ready to lessen the interest amount. After interest getting lessened, the resultant amount is expected to be lower and within your capacity to pay. Once the deal gets reached, the bank will issue the debt settlement letter.

How can you check the authenticity of credit card settlement letter?

There is a growing possibility of fake settlement letters being issued to you. In order to check the authenticity of the letter, please consider the below mentioned points.

  • Call the bank executive to meet you and settle the due amount
  • Don’t pay anything in cash while going for the settlement. Instead give a cheque or demand draft of the settlement amount. Demand draft may incur a nominal charge, which will not bother you much. Make a photocopy of the demand draft and cheque.
  • Don’t get bothered by the statement of the bank executive prompting you to make the payment first and then only the settlement letter will get issued. Insist the bank executive to provide you the settlement letter at the time you are making the payment. Check the authenticity of the bank’s settlement letter by scrutinizing what is written on the same. Also, check whether the bank seal is affixed on the letter or not. In the absence of the same, you should avoid making the payment. Otherwise, hand the demand draft to the concerned banker.
  • Even after receiving the settlement letter, you need to call the customer care department of the bank to get the clarification on the letter on the phone. Ask the customer care if the bank has generated any credit card settlement letter in your name. If the answer comes in affirmative, then get the reference number mentioned on the settlement letter from the customer care. Check the settlement details like amount and date of your credit card debt settlement.

Well, you can get the debt settled taking the steps advised in the article. But there are a few pitfalls associated with the move. Find out below which are those.

Long-term consequences: Settling a credit card loan can leave reverse impact on your credit history. If the bank is not satisfied with the settlement amount, it can sue you to get the whole amount. Which could further increase your financial burden.

Impact on credit history: If you go for credit card settlement it can create negative impact on your credit history. If you will apply for any loan in future it will be marked in your report as ‘ settled’ which will create a negative impact on your credit history.

Lower the chances of getting another loan: As you have a negative credit history and most of the banks consider the credit history and credit report before lending you the loan to check your credit worthiness. A negative credit history will lower your chances of getting another loan or it will be difficult for you to convince the lender to offer you an unsecured loan. If you are in your late 50s of age, it is good option to become debt free and settle your loan before your retirement, but if you are in your 40s of age, then you should avoid settling the loan rather make the payment by taking personal loan or borrow money from your friends or family members to make the payment against your credit card debt.

Difficulty in improving credit history: It is not easy to improve the credit history. It takes time to build a good credit history as you need to pay more attention to your outstanding and payments on time. It will take another few years for you to improve your CIBIL score and build a good credit history.

“Settled” gives wrong message: The word “Settled” gives a wrong message to the lender, when it digs your credit history. It showcases your default payments and indicates your low creditworthiness. It also gives the impression of higher risk factor with you as your credit history is not much promising.

Higher rate of interest and other charges: If any bank agrees to offer you a loan in the future, then for sure it will offer you the loan on its terms. Your chances of negotiating with bank reduces because of your defaulted credit history. In such case, banks offer you a loan on higher rate of interest with other higher charges. So, settling your debt could lead to a higher rate of interest in future for a loan.

Lower loan eligibility: When you apply for a new loan in future with a faulty credit history, there are chances that bank will offer you a loan amount lower than your eligibility or required amount. So, it reduces your chances of getting a higher loan amount be it a secured or unsecured loan.

Settlement of your total payment is done in the following order:

  • – Minimum Amount Due (which is inclusive of all applicable taxes + EMI on Loan plans + 5% of Total Outstanding)
  • – Fees & Other Charges
  • – Interest charges
  • – Balance Transfer Outstanding
  • – Retail Outstanding
  • – Cash Advance

Applicable Taxes means:

  • •For the cardholders having state of residence in the records of Tata Cards on the statement date as “Haryana” – Central Tax @ 9% and State Tax @ 9%
  • •For the cardholders having state of residence in the records of Tata Cards on the statement date as other than “Haryana” – Integrated Tax @ 18%

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If you wish to settle your agreement early in full, or would like to know what your current balance and settlement figures are, this information can be obtained instantly by accessing the online Account Management tool (personal customers only).

Please ensure that you have the following information at hand:

  • Your 12 digit Northridge agreement number
  • Your date of birth
  • Your bank account number

Partial Settlements – If you do not wish to settle your agreement in full, but would like details on making a partial repayment to your account, click here

Non personal / Business customers can request a settlement by completing the Online Settlement Request Form on this website with the relevant details and our team will respond to your enquiry within 2 business days. Personal customers can also use this form, but please note that response may take up to 2 business days.

Making a Payment

Once you have received the settlement figure, settlement can be made by one of 3 methods:

  • By making an electronic bank transfer (through your online banking facility or via a branch transfer). We do not charge for this facility but your bank may do so. The details are as follows:

Payee: Northridge Finance

Sort Code: 56-00-05

Account Number: 21339406

Reference: Please quote your 12 digit Northridge Finance agreement number. If this number is not quoted there may be a delay in the payment reaching your account.

  • By Debit Card** We accept cards shown below from any UK bank (maximum payment of £10,000 and Credit Card payments are not acceptable). Please note that Northridge Finance is part of NIIB Group Ltd, and your email receipt/statement on your account will show payment to “NIIB Group Ltd.”

Payments may be made by clicking here.

** This service is available 24 hours a day. Please allow 3 – 5 working days for payment to clear. Sometimes participating retailers will ask you to enter a password if you have registered with a ‘Verified by Visa’ or ‘MasterCard SecureCode’ scheme. We cannot accept online payment for any other service or for payment of any other Bank of Ireland product. If your card is not registered in the UK, our payment facility is unable to accept an online payment. Any personal information that you provide will only be used to process your payment.

We use a third party, WorldPay, to collect all payment details and process payments made through our website.

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Northridge Finance is a trading name of NIIB Group Ltd. NIIB Group Limited is authorised and regulated by the Financial Conduct Authority. NIIB Group Ltd is registered in Northern Ireland at 1 Donegall Square South, Belfast, BT1 5LR. Registered Number NI3721.