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Once a debt has been sent to collections, the original creditor writes off the debt and takes an accounting loss. The collection agency earns between 25% and 60% of what it is able to collect but, in order to earn, the agency must collect something. There exists a strong incentive for the collection agency to settle the debt for what it can now and move on. This little known fact opens the door to negotiating with an agency attempting to collect a debt.

While the agency has strong motivation to collect 100% of the debt owed, they will consider almost any reasonable offer. Remember, it is in their best interest to collect something now in order to get paid rather than risk being paid nothing and having the account pulled by the creditor and sent to another agency. Make the offer sweet enough and the agency will settle with you.

Let’s say you owe $750 and you are able to pay half of the amount, or $375, today. Don’t offer the whole amount you are willing to pay simply because if the agent you are dealing with smells a deal they will assume that you are able to pay more than you say you can pay. It is, therefore, to your advantage to offer less than the top figure you are willing to pay. So offer between 60% and 75% of your top dollar figure. In this case you should offer something between $275 and $281. I suggest that you don’t end your initial offer in an increment of $5. Offering $280 or $295 sounds like a best guess at what you are able to pay. Offering $277 or $277 leaves the impression that you have given some thought to what you can actually afford to pay now. By using precise dollar amounts in your offer you are more likely to get a lower counter offer from the agent. But you will get a counter offer–you can go to the bank on that.

Never let the agency know the source of your money. Don’t tell them that you are getting help from your parents, that you have a friend that is willing to help, or that you have just won the lotto. Read more of this >>