Debt Settlement Letter – How To Make It Effective

A man writing a debt settlement letter.
Photo by Scott Graham on Unsplash

An effective debt settlement letter lends great impetus to a debt settlement campaign. Debt settlement letters lay the foundations for an effective debt settlement. Apart from serving as an indicator to the creditors about your willingness to go for a debt settlement, these letters also put forward the proposed terms and conditions for settling debts. Therefore, a debt settlement letter, sent by a debtor to the lender is in effect a proposal to settle debts, and embeds the recommended terms and conditions on which a debt settlement shall lay its course.


You may need to write a debt settlement letter on your own in case you are not using the services of a debt settlement company or a professional lawyer. A debt settlement letter invariably serves as a legal agreement between a debtor and the lender. A debt settlement letter, if done appropriately, can work to a great advantage in settling debts and improving your credit history. Here are a few pointers to keep in mind before you go ahead with formulating a debt settlement letter:

1. Just as with any professional letter, make sure that you have pinned your particulars to the start of the letter. Your name, address, zip code and the date should be clearly mentioned at the start. Do write your account number for the account you have with the creditor.

2. Follow it up by providing similar details about your creditor.

3. Since a debt settlement letter is virtually a request to your creditor to negotiate on the outstanding debts, the tone of the letter should be polite and humble. Refrain from using a language that has emotional tone. The effort should be to use a humble tone without taking away the professional look of the letter.

4. Write in brief and to the point. The debt settlement letter should clearly focus on your financial situation, and a willingness to settle debts with your creditors.

5. Make the offer and terms clear and easy to understand. This is the core to an effective debt settlement letter. The terms and conditions that you intend to propose should be well executed in the letter.

6. Before signing off, clearly mention your intended methods to settle the debts in case your creditor accepts the terms and conditions of the letter. You should also request your creditor to inform the relevant credit bureaus once you have paid the negotiated debts.

7. A creditor, after receiving your debt settlement letter, may want to negotiate on the terms offered by you. Your letter should speak about such negotiations in brief and mention ways to go about it.

Sample of debt settlement letter

The above points lay down some very useful information that can help you with a debt settlement letter. There are samples of debt settlement letters available on the Internet that can help further when you are required to come up with a debt settlement letter. Refer to such samples, garner relevant ideas, and formulate an effective letter on your own.

Bearing in mind the pointers as listed above, an ideal debt settlement letter should fall in tune with following specimen:

Your name
Mention your complete address
Mention your contact number zip code
Mention the date on which the letter is written

Replicate the same details about your creditor in the same format as above. Do not mention the date of the letter this time.

(Begin with an appropriate salutation.)
Re: (Mention your account number.)

Cite the debts you owed in all, the debts you have cleared and the outstanding amounts. Make a reference to the time-period and rates for the debts.

Now clearly state your financial condition and back it up with your credit reports and other documents.

Next, propose your intended offer. Depending on what suits you best, you may either offer lower interest rates, increased time-periods or lower periodic payments. (Your offer should be substantiated by reasonable calculations.)

Assure the creditor that you will keep them posted about your financial status.

Thanking you,
Your name

Debt settlement letter can go a long way in setting up a favorable deal for you. The key is to be precise, and write correctly.

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