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Summary: Many debt collectors are happy to accept payment plans for debtors who want to pay in full, although payment plans for settlements are less common. Still, collectors are more likely to work with you if you get in touch early on. When you're trying to get out of debt, Solo is here to help.

If you desperately want to settle your debt but don't have much cash on hand, you might wonder, "Can I make monthly payments on a settlement?"

Perhaps, but other approaches to resolving debt are more common. Here's a closer look.

Read our debt settlement guide to learn more about how to settle your debt and save thousands.

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Can I make monthly payments on a settlement for debt?

Debt collectors are in the business of trying to take money from people who typically have very little money. That's why many of them will arrange payment plans. Some debt collectors openly advertise this fact. For others, you'll have to contact the collector directly to set up a plan.

Generally, debt collectors accept payment plans for consumers who want to pay their debts in full.

Settling the debt (resolving it by paying less than the face value) is a little different. If you're settling, the collector will probably want a lump-sum payment. Since they are already compromising by accepting less than you owe, they aren't likely to agree to let you pay over time, too.

SoloSettle makes settling simpler.

Negotiating a payment plan means taking action now

Although many collectors accept payment plans, they are not obligated to do so. If you want to negotiate a payment plan, timing matters. A debt collector may be more willing to grant you a payment plan if the following apply:

You haven't been sued for the debt yet.
The debt collector has only recently started contacting you about the debt.

If you haven't given the debt collector reason to believe you'll default on a payment plan, they're more likely to agree to one.

However, if you've dodged their calls for so long that they filed a debt lawsuit against you, they might reasonably doubt your ability to follow through on a payment plan.

Verify the debt first

Before asking for a payment plan, you should verify that the debt belongs to you. The Fair Debt Collection Practices Act (FDCPA) requires debt collectors to send a debt validation notice within five days of initially contacting you (15 U.S. Code § 1692g). The notice must include information about the debt to help you determine whether it belongs to you.

Look over the validation notice carefully. If you recognize the debt, you can proceed to ask for a payment plan. If you don't, disputing the debt should probably be your next step.

The FDCPA gives you the right to dispute inaccurate debts with debt collectors. Another law, the Fair Credit Reporting Act (FCRA), allows you to dispute inaccurate debts and other items with credit bureaus (15 U.S.C. § 1681i).

If the collector is trying to collect a debt that you don't owe and that debt is also appearing on your credit report, it's a good idea to dispute it with both the debt collector and the major credit bureaus.

Decide how much you can reasonably pay

Before you ask for a payment plan, take a look at your finances and decide how much you can reasonably pay. When in doubt, err on the side of caution. If you default on a payment agreement, the debt collector might take it as a sign that you don't intend to repay the rest of the debt and start the lawsuit process.

Have you been sued for a debt? SoloSettle can help you resolve your debt and avoid going to court.

Make your offer

If you're anxious about calling up a debt collector to ask about a payment plan, you're not alone. Before you get in touch, take a look at the collector's website. Some have client portals or online forms you can use to request a payment plan.

To see how the process of negotiating a payment plan might work, let's consider an example.

Example: Trisha gets a letter in the mail from a debt collector, which says that she owes $400 on an old medical bill. She thinks she can pay the bill eventually, but she's worried she'll be sued for the debt if she waits too long. Trisha looks at her finances and decides that she can pay $80 per month. She calls the collector and asks if she can pay the debt in five monthly installments of $80 each. The collector agrees, and once those five months have passed, Trisha's debt is paid in full.

Negotiating a settlement means paying less than you owe

If you can't afford to pay your debt in full (or if you're in a time crunch because you've just been sued), settling might be your best option. Here are a few tips to help you negotiate.

If you've been sued, respond to the lawsuit

If the collector has already sued you for debt, you have a limited time to respond. You must send an Answer by your state's deadline. Otherwise, the debt collector will most likely win by default.

Sued for a debt? Send your Answer with SoloSuit.

Decide how much you can afford to pay

Once you've sent your Answer, you can try to settle your debt. Before you get in touch with the collector, look at how much you can pay. We usually suggest offering 60% or less of the debt.

Reach out with an offer

Once you know how much you can pay, contact the collector to make an offer. If you want to pay in installments, this is the time to ask. Emphasize that you'll be able to pay more if you don't have to come up with a lump sum.

However, keep in mind that most debt collectors will say no. Instead, they'll require a single payment.

Whether you're paying in a lump sum or asking for a payment plan, don't start out by offering the maximum amount that you're willing to pay. The collector might not accept your first offer, so you should be prepared to negotiate. This process can be stressful, but always remain polite and respectful!

Get the agreement in writing

Your settlement is a legal contract, so you should get it in writing. It's not unheard of for a debt collector to agree to a settlement and then file a lawsuit anyway. If this happens, you can use the written settlement agreement as an affirmative defense.

Is it better to settle the debt or pay it in full?

When you have a debt that gets charged off or goes to collections, your credit is already damaged. Late payments, collections and other negative items don't fall off your credit report quickly, but the law requires them to be removed after seven years (15 U.S.C. § 1681c).

That might seem like a long time, but as the months and years pass, the impact on your credit score will get smaller and smaller. And depending on what you do after the debt goes to collections, you may be able to reduce the damage:

If you pay the debt in full, there will not be any further damage to your credit.
If you settle the debt, your credit will be moderately damaged.
If you don't pay anything, you'll suffer the most credit damage.

You can't go back in time and prevent a debt from going to collections. However, you can start to rebuild your credit by setting up a payment plan or negotiating a settlement.

Key takeaways: Can I make monthly payments on a settlement?

If you're in deep debt, you want to get out any way you can. A debt settlement or payment plan could make that possible. Before you get started, keep the following in mind:

Many debt collectors will let you pay your debt in installments if you're paying in full.
Most collectors will require you to pay a lump sum if you're settling your debt.
Even so, you can always ask the collector if they'll let you pay your settlement in installments.

Want to settle your debt without having to make a phone call? Get started with SoloSettle now!

FAQ

Can you make payments on a debt settlement?

Maybe. Most debt collectors require settlements to be paid as lump sums. However, there's no harm in asking if the collector would accept a settlement in installments.

Does a debt settlement have to be paid in full?

When you settle a debt, you enter into a contract with the debt collector: You must pay the amount you agreed upon, and in return, the debt collector will consider your debt resolved (and drop any pending lawsuits). If you don't pay the full settlement amount, the debt won't be resolved, and you may face a lawsuit.

Is it better to do a settlement or pay in full?

When it comes to your credit, it's better to pay a debt in full than it is to settle. If paying in full simply isn't possible, settling the debt is better than not paying it at all.

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Can I Make Monthly Payments on a Settlement?