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What are Full and Final Settlement Offers?

You may have heard the term ‘full and final settlement’ and it refers to working out a lump sum figure between you and your creditor that is less than the full balance you owe them on your credit card or personal debt in return for the creditor writing off the rest of the debt. Many people use this method of debt pay off when they come into a fairly good size lump of money from an estate settlement, overpayment on taxes, or if they had some savings in the bank that you want to use to settle your debt. Sometimes a family member will offer the money to pay off your lender. When they do, let your lender know that the offer will not be available forever and ask them to give you an answer.

When you go to make a full and final settlement offer, it is best to do it via letter although you can call the creditor and make the arrangements over the phone and follow it up with a letter. Always make sure you keep copies of all of your correspondence to the creditor that you send and all of the letters they send back, especially the letter stating that they accept your proposed offer. Never send them any money until the acceptance letter is in your hand and when you do send the money via a neutral third party if the creditor will accept it that way. If you are worried about the agreement being legal and binding, have a solicitor draw it up for you and both you and your creditor sign it. Make sure that when you sent your creditor the letter with the full and final settlement proposal on it, you ask that the creditor change your credit reference report to show that it has been paid and satisfied and that you get in writing the creditors agreement to this.

  • You do not need to go to a debt management specialist to ask for a full and final settlement with your creditors. This is something you can easily do on your own. If you have multiple debts to pay, you can the money you have and divide it up among your creditors with pro-rata offers, meaning that each creditor will get a fair share of the money you have at hand based on how much you actually owe them. In order to do this, you need to find out exactly how much you have in outstanding balances on your credit cards and loans. From here, using a payoff calculator found on the site, you can now send a letter to your creditors with the pro-rata full and final settlement offer.
Once you determine what the pro-rata amount of payment for each creditor is, it is best that you send the letter to all of your creditors showing them in a small table exactly how much all of your creditors are going to receive. This helps them see that they are all getting a pro-rata settlement and that they are being treated fairly and equally. If you should happen to have some creditors refuse and some accept, contact them again explaining to them the specifics of your situation including any blackmailers that have accepted your offer. If they still do not agree, then it is time to contact someone who can help.
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