# Settlement Offer



## finishitoff (19 Dec 2016)

Hi

How much should a settlement offer on unsecured debt be ?

I have a payment plan with the bank and want to settle it but would like some guidance on what kinds of deals other have previously managed to do in these circumstances. 

Many thanks


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## cremeegg (19 Dec 2016)

Why would the bank accept anything less than payment in full including interest


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## vandriver (19 Dec 2016)

Your position of strength here is if you aren't up to date with your payment plan.Otherwise you're showing the bank that you can ultimately repay the full sum.


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## finishitoff (19 Dec 2016)

cremeegg said:


> Why would the bank accept anything less than payment in full including interest



1. Settlement amount with interest rate of zero. 

2. The time value of money and costs of administration of the file.


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## finishitoff (20 Dec 2016)

vandriver said:


> Your position of strength here is if you aren't up to date with your payment plan.Otherwise you're showing the bank that you can ultimately repay the full sum.



that isn't the issue, it's whether it is worth more to them to receive a lesser amount now.

Wondering what kind of calculation people have justified in this circumstance..........discount at the banks weighted cost of capital ?


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## Bronte (20 Dec 2016)

I don't see why the bank would offer you a settlement if you are currently up to date in your payments.  Does it matter if he debt is unsecured, not if you have a good salary.  This is a question that begs what else is going on financially but no details posted.


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## finishitoff (20 Dec 2016)

Bronte said:


> I don't see why the bank would offer you a settlement if you are currently up to date in your payments.  Does it matter if he debt is unsecured, not if you have a good salary.  This is a question that begs what else is going on financially but no details posted.



the payments are part of a settlement plan. the settlement plan attracts  no interest. 

Say i owe the bank 50 by way of 5 future payments of 10 euro. All the bank will ever receive is 50.
However it costs 10 euro to administer the file over that period and they can lend the funds they receive at 10% annually then in those circumstances. 
If I pay 30 today 
They rel-end the 30 @ 10% earning say 5 years @ 10% = 3 per annum interest  =15 + 10 saved on administration of the  the file + 30 settlement = 55

versus the 50 they would otherwise receive.


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## Bronte (20 Dec 2016)

Would you not be better of saying nothing and paying it off seeing as it's costing nothing.  Because if you reopen this with them, they are going to wonder where you suddently have money from and they might decide to not only charge you interest but penalties as well. Goodness knows what's in your paperwork that they can use against you in the small print. 

How much are we talking here Finishitoff? 50K and you want to pay 30K?  Or are we talking 5K and you want to pay 2K?


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## Gerry Canning (20 Dec 2016)

Not enough info given.
Sounds a bit like you want your cake and eat it ! Am I too hard ?

A lot depends on where,when,what and how debt built up.
A lot depends on how you treated bank, bank treated you .

Normally banks will settle once they have a full view of the mess you are in , the bigger the mess , the bigger a writedown.


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## finishitoff (20 Dec 2016)

Gerry Canning said:


> Not enough info given.
> Sounds a bit like you want your cake and eat it ! Am I too hard ?
> 
> A lot depends on where,when,what and how debt built up.
> ...



You are missing the point. The debt writedown has already been agreed.

I am offering to accelerate the timing of payment. The price for the accelerated payment for the bank should be a further writedown, because of the time value of money. 

I'm looking for some ideas on how to price the time value of the payment to the bank.


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## Gerry Canning (21 Dec 2016)

Given low interest rates ,time value ,depending on debt size won,t be a lot.
Against that , giving your head peace ! and getting shot of bad-times past could be valuable.

I hope debt writedown is clean with no nasty (if your situation improves) one.

The Banks time./value may be negated by tax shuffling .
I reckon , ask them and if you get more off= great , if no more off and closure suits you = go for closure.

And good luck.


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