Until you heard about debt relief, you assumed you’d have to file bankruptcy. So, you’re excited to look more into it. But you’ve also heard that debt relief has more than its share of cons. To help you, here are the traits of an honest debt relief company.
What’s Debt Relief?
Also called debt settlement, debt relief is a financial approach in which you get a company such as Freedom Debt Relief to go to your creditors to see whether they’d “settle” your debts for less than what you owe. Most of your creditors will work with you because a bankruptcy filing nets them zero.
How Does it Work?
You’ll usually be asked to deposit funds monthly into a dedicated savings-type account that will eventually be used to pay your settlements. Each account is negotiated separately.
What’s the Issue?
There are a few bad actors out there that are all-too eager to take advantage of your vulnerable state. Fortunately, with a little guidance, they’re pretty easy to figure out. And, keep in mind that most settlement companies are on the up and up – there’s noFreedom Debt Relief scam, for example — so you shouldn’t be dissuaded from steering away from a proven strategy that could give you a fresh start.
Settlement Fees
What you want is a company that waits until they’ve, ah, DONE something for you before they send you a bill. Legit settlement companies follow federal law: they don’t charge you until they’ve satisfied debts on your behalf.
Honest debt relief companies are also transparent about their fees and how they’re constructed. You’ll usually pay between 15% and 25% of enrolled debt, but you shouldn’t feel pressured to sign onto anything before you have a full understanding of what to expect and when.
Guarantees
As we say, most creditors will ultimately settle debts. But in negotiations, nothing is “guaranteed.” So, show deuces to any company that swears it can settle all your debts, usually for pennies on the dollar, oh, and within a certain time frame. The reality is that your company’s success hinges a great deal on whether you can save the amount you need to entice creditors to settle.
Still, it’s important to choose an established, credible company that has experienced bargainers to go to bat on your behalf.
Eligibility
Legit settlement companies have no problem telling you the kinds of accounts it handles and how much debt you need to qualify for their program. For example, most such companies only accept, with a few exceptions, unsecured debt – obligations that are not linked to collateral. You usually also must have a certain amount of debt, although each company has its own requirements.
If a company tells you that it accepts all comers – any kinds of debt, for example, with no eligibility requirements – run away fast. That’s a sign of a scam company.
Risks
A legitimate debt relief company will explain to you that the process of debt relief can cause your credit scores to temporarily drop. But then, your credit rating hasn’t been great for some time now. Once your debts are settled, and your spending is under control, your scores will rebound, and your new life will begin.
Timing
A reputable company will tell you that negotiations don’t start right away. Remember that savings account we mentioned? Well, you’ll need time to build that up. The amount you’ll need to save will depend on factors such as your income and the size of your enrolled debt. It’s only until you’ve saved enough to offer a creditor a one-time payment in full to satisfy your debt that negotiations begin in earnest.
Now that you know the traits of an honest debt relief company, you have no excuse to not act – today.
Haven’t you waited long enough?
