How does a discount work with debt?

What is a debt settlement offer (DSO)?

A debt settlement offer is a type of debt solution that could allow you to repay a lump sum for a lesser amount than your total debt. Sometimes, your creditors may also allow you to repay the reduced balance over a specified period of time through a payment plan. 

The rest of the remaining balance will then be written off. A creditor will need to agree to the terms of the debt settlement offer in order for it to take place.

If you’re struggling to pay an outstanding debt, you may be able to look into a debt settlement offer. Alternatively, it may be your creditors who get in touch with you to discuss debt settlement offers.

In most instances, a debt discount can be used as another way to refer to a debt settlement offer (DSO). For instance, here at Lowell, we tend to use the wording ‘debt discount’ rather than ‘debt settlement offer’.

There are two different types of debt settlement offers – a full and final settlement and a partial settlement. Sometimes these terms are used interchangeably but there is a key difference between them both which we’ll explain below.

Deciding whether a debt settlement offer is right for you entirely depends on your personal situation and what you can afford. It’s worth noting that there is no obligation for your creditor to offer or accept a reduced debt settlement offer.

If you’re unsure about whether a DSO is right for you or are interested in making an offer to your creditors, there are organisations who can offer expert debt advice such as StepChange and National Debtline.

What is a full and final settlement?

As we mentioned above, a full and final settlement means your creditors have agreed to you repaying less than the total debt owed with the rest being written off. This may be done through either a payment plan or as a lump sum payment.

Once paid, a full and final settlement will be marked down on your credit file for up to six years as ‘fully satisfied’.

What is a partial settlement?

Similar to a full and final settlement, with a partial settlement you’ll be able to pay a reduced amount of your outstanding debt by either a payment plan or lump sum payment.

The main difference is how it’s recorded on your credit file - a partial settlement will be noted as ‘partially satisfied’, again for a period of up to six years. This shows to future potential lenders that you have paid off the outstanding balance at a reduced amount.

At Lowell, we only offer partial settlements. So, if you’re a Lowell customer and have been offered a ‘debt discount’ by us, this will be referring to a partial settlement.

What percentage should I offer to settle debts?

The percentage you could offer depends on your personal circumstances and what you can afford. If you owe money to more than one creditor, this may also affect the percentage you’ll be able to offer.

You can read National Debtline’s guide on full and final settlement offers for more detailed information on how to work out a suitable offer. They can also provide you with advice on the different debts you may have.

Can I settle debts with multiple creditors?

Yes, it is possible to settle debts with more than one creditor, and this can happen in a few ways.

If you have outstanding debts with multiple creditors, you may be able to settle on some accounts and not others.

You may also be able to make a pro-rata offer which means you can pay them all off with one lump sum. The lump sum is divided between the creditors in a way that reflects how much you owe them. For example, you would offer more to the creditor that you owe the most money to, and less to the creditor that has the smallest balance. A free money advice organisation, such as the ones listed in the first section, will be able to help you with this.

Do debt settlement offers apply to priority debts?

Priority debts are debts which you should focus on paying off first such as rent or mortgage arrears, gas and electricity bills, and council tax. These are more important than non-priority debts as there can be significant consequences if they are not paid. It may be less likely for a priority creditor to agree to a settlement of a debt.

If you've got multiple outstanding debts, it may be the case that you end up only arranging debt settlement offers for those which are non-priority.

Does a settlement appear on my credit file?

Similar to how debts appear on your credit file even after being fully paid off, a settlement offer will also be marked on your credit file. A full and final settlement offer will be marked as ‘fully satisfied’ whereas a partial settlement will show as ‘partially satisfied’.

In the short term, this may have an impact on your credit score as it lets future lenders know that the debt wasn't paid off in full. However, a settlement offer can be viewed more favourably than an outstanding debt seeing it shows that you came to an agreement with your creditors to pay off the balance.

After six years, either from the date of the settlement or when it defaulted if that was earlier, a partially settled debt will no longer appear on your credit file.

You can read our useful guide on credit files to find out even more about why your credit file matters and how it can affect you.

Key points to consider before agreeing to a debt settlement offer

• A debt settlement offer can lower the amount of debt you have to pay off
• It may appear on your credit file for up to six years. This information can be used to help inform the decision of future lenders
• When looking at your credit file, future lenders may view a debt settlement offer more favourably than an outstanding debt.
• From a creditor’s point of view, a DSO on your credit file isn’t the same as paying off your debt in full
• It may not be the best way for you to deal with your outstanding debts and therefore may not be the right solution for you
• If you’re on a DSO payment plan and don’t meet payment plan requirements, then your offer could be ended and discontinued
• A creditor doesn’t have to agree to giving you a debt discount

Do Lowell write off debts?

Because of the range of options that we can offer to help you manage your account, it’s unlikely that we would just write off an account. However, in some cases, we may be able to offer a discount on your account.

Being offered a discount on your Lowell debt may not always be possible and it will vary from case to case depending on your debt and circumstances. You may have heard an offer of a discount on the balance of your debt described as a ‘Lowell debt discount’ or ‘Lowell settlement offer’, but we’ll usually just refer to it as a discount, or as an offer of a discount on your balance.

We understand that having debt can be worrying. If you have a debt that's been purchased by Lowell and you're not sure what to do next, we have a helpful guide to your next steps which will explain how we'll work with you if you're unable to pay or if your circumstances have changed.

Do Lowell offer debt discounts?

Not all accounts will qualify for a discount, so we can't guarantee that you'll receive a discount offer from Lowell. If you're concerned about your debt and want to know if you qualify for a debt discount, please get in touch with us. Our helpful team are considerate of your situation and will always take the time to listen and understand.

It’s worth noting that some of our offers are only available for a limited time, and there may be some additional conditions in place as well. For example, your debt discount offer may require you to pay the settlement discount amount within 12 months.

We can assist you in setting up an affordable payment plan, and if you're having a difficult time. we'll give you time to get things back on track. If you want to know how we'll work with you, check out your next steps. We may also be able to put you in touch with independent organisations who can offer free and impartial debt help and support.

If your debt has been purchased by Lowell, the easiest and most manageable way to clear your debt as soon as possible is by working with us to set up a payment plan.

What does a Lowell discount offer mean for my credit file?

If you accept a discount on your debt and clear your balance with it, this may appear on your credit file for up to six years. Depending on the type of debt settlement offer, this will either be marked as ‘fully satisfied’ or ‘partially satisfied’.

This will be the same whether you use a payment plan to clear the discounted balance or pay it all in one go. The credit file will be updated once the settlement has been paid in full.

As mentioned previously, this shows potential lenders that the debt was cleared, but for less than the full amount. It’s worth bearing in mind that having a debt discount appear on your credit file might make future lending more difficult and it may impact the cost of credit that is offered to you. For example, this could affect the decision if you apply for credit products like credit cards or mortgages.

What should I do if I receive a Lowell debt discount offer?

In some situations, we may be able to offer you an opportunity for a discount on your debt. The amount of discount that we offer can be different from case to case.

In order to accept the discounted offer, you'll need to get in touch with us. From there, we’ll need to agree to either set up an affordable payment plan, or if you're able to, clear the discounted balance in one payment. You can do this over the phone, by making a payment to your Lowell account online, or through our mobile app. 

Can I wait to start making payments once I accept a discount?

No. The offer can only be accepted if you set a payment plan or pay the discounted amount in one payment.

We can agree when you want to start paying, so that it fits in when you have funds, but a payment will need to be made in a reasonable timeframe.

The discount can only be applied to your account while setting up a plan with us, or while we’re arranging your one-off payment.

How do I accept a Lowell debt discount?

If you've been offered a discount on your debt by Lowell, you can accept it by getting in touch with us and advising us that you want to accept the discount. You can also accept the discount online when setting up your payment plan. The discount will automatically show on your online Lowell account.

In either case, if you decide to start a payment plan to clear the remaining balance of the debt, you can still work with us to make sure that the payments you make are fair and reasonable for your budget. You can talk through this with us on the phone or use our Budget Calculator to work out an affordable payment plan. 

Are there any conditions to a Lowell debt discount offer?

If you've received a letter offering you a discount on your debt with Lowell, there will usually be a time frame given in the letter.

If you try to accept the discount offer after the time frame given in the letter, the offer may have expired.

Your debt discount may also no longer apply if you miss a payment towards your settlement agreement with Lowell.

What happens if I accept a Lowell debt discount offer and can't keep up with payments?

When you choose to accept a discount offer from Lowell, you can decide to pay the remaining discounted balance through a payment plan. If you're unable to make payments, it's possible that the plan may be cancelled or broken due to those missed payments. If this happens, the discount will no longer be applied to the balance.

If you do miss a payment or you think you’re going to miss a payment, it’s important that you get in contact with us. If you speak to one of our helpful team members you should make them aware that you had a discount on your account.

If your circumstances change, or if you're worried that you might miss payments, contact us and let us know. We're here to help, so if you're going through a tricky time, we may be able to help by pausing payments or helping you get in touch with independent organisations that can offer financial advice and debt support.

Receiving a discount offer on your debt can make it easier for you to start your journey towards becoming debt-free with your Lowell debt. But even if it's not possible for you to receive a discount, arranging a payment plan with Lowell is a simple and affordable way for you to begin clearing your debt with us.

For more support and guidance on debt and how working with Lowell can help you, head to our debt guidance hub.