No, you never thought you’d be in this position, and no, you can’t emerge from it alone. But, yes, debt relief is a viable option that can give you a fresh start. You’re not all that clear on the financial strategy, though. Well, we’re here to help. Here’s what the best debt relief programs do.
What is Debt Relief?
It’s an approach wherein you hire a debt settlement company to go to your creditors – typically credit card issuers – and get them to “settle” your debts for less than what you owe. Yes, you read that right. The reason that debt relief – also called debt settlement – usually works is because if you file bankruptcy creditors get zilch. Creditors know this.
How Does it Work?
Typically, you’ll be asked to tuck away money each month in a dedicated savings account that you control. When you’ve saved enough, the company will begin negotiations with your creditors. One-time payments in full for each settlement will come out of that account.
Doesn’t Debt Relief Hurt My Credit?
The process of debt relief will scuff your credit report – temporarily. When all your debts are settled – happy day! – and your spending is under control, your scores will rebound. Your credit hasn’t been great in some time anyway, right?
Will Debt Relief Work for Me?
The best debt relief programs help those who are carrying a high credit card balance or a lot of unsecured debt – accounts not attached to collateral such as a house or car. If you can’t see your way out of debt within five years – even with spending cut to the nub – debt relief may be for you.
Aren’t There Lots of Scams?
Most debt settlement companies are legitimate. However, the industry does have some tricksters who will seek to take advantage of your vulnerable state. Here are some traits of credible debt settlement companies:
- They are open about their fee structure. Legit debt settlement companies don’t charge you up front, which is illegal, although some scam companies try it. You’re only to pay a fee after a settlement is reached. Fees vary, but usually range in the 15-25% range.
- They are forthcoming with information about their services. Some bad actors will withhold that info pending receipt of data from you such as your account numbers and debt amounts.
- They are accredited. Again, you want to make certain you’re getting a legit company. Such firms are typically members of trade organizations such as the American Fair Credit Council and the International Association of Professional Debt Arbitrators. If they are not, shy away.
- The company makes no “guarantees” it can make all your debts go poof! While most debts are settled, there are no guarantees in any negotiations because another party is involved.
- They don’t claim to be privy to “a new government” program you’ve someone never heard of. Firms that make such claims are typically scammers.
- Rather than string you along while they take your money, credible settlement firms give you some idea of when you realistically can expect resolution, and what your savings likely will be.
- They have lots of easy-to-find positive reviews and customer testimonials. Check out the company you’re interested in online. You should also check for complaints with your state’s attorney general and local consumer protection agency.
Now you know what the best debt relief programs do – and don’t do. Get yourself a credible, experienced, accredited company and get going. Haven’t you waited long enough?