Your pretty sure debt relief will be a good fit but you’re a little skittish about the unscrupulous companies you’ve heard about. While most settlement companies are legit, you do need a bit of help identifying debt relief scams.
We’ve got you covered.
What is Debt Relief?
Let’s make sure we’re on the same page. Also called debt settlement, debt relief is a financial strategy that involves you getting a company to negotiate with your credit card issuers and any other unsecured creditors to get each of your debts reduced. You then make a one-time payment in full to “settle” each debt.
How it works is, after an initial free consultation in which your situation is assessed, you’ll be enrolled in a program tailored for you. You’ll then begin depositing funds each month into an escrow-type account, and when you have saved enough, the company will go to your creditors on your behalf, using your account as leverage. After each debt is settled, the payment will come from your account.
What Kind of Debt Does it Cover?
This depends on the company, but in addition to credit cards, it includes most debts that aren’t secured – meaning they aren’t tied to collateral such as your house or car. Debts from medical bills or personal loans are commonly entered into a settlement.
How Long Does Debt Relief Take?
This also varies by company, but you can figure between two and four years – way less than the time it would take if making regular, mostly minimum payments.
What About My Credit Score?
Your scores have probably been on the low side for some time, right? It’s okay, that can work in your favor: the companies you owe will be motivated to work with you if they think you might file for bankruptcy and leave them with zipping.
But yes, the process of debt relief will cause your scores to dip – temporarily. Once you’ve completed your debt relief program, they will rebound.
Should I Be Afraid of Scams?
Broadly speaking, not really. I mean, is freedom debt relief scam or not? (In fact, it’s the nation’s leading debt settlement company). Most other companies are above board as well.
However, there are flim-flam companies out there that are looking to do minimal work for you at best, straight out rip you off at worse. However, there are red flags that will alert you to potential trouble.
For one thing, it’s a major bad sign if a company seeks payment before it’s settled a single debt for you, which is against the law, by the way. And there’s a good chance they’ll take your cash and skedaddle.
Another red flag is a refusal to provide details of the program until you give them data such as your credit account numbers and payment histories.
You also don’t want a company that’s not transparent about its fees. If you feel like something’s sketchy going on fee structure-wise, there probably is. And watch out for “over-promising.” These types will guarantee they can put you back on Solvent
Street for pennies on the dollar and by a time certain. There are no such certainties when it comes to negotiations, however successful the strategy is.
You also might come across an announcement along the lines of “a new government program!” These unsavory companies are merely invoking “government” in their scheme in hopes of lending it credibility. Ignore them.
Now you know more about debt relief and identifying debt relief scams. Focus on getting an established, credible, and reputable company to help you, and you’ll be just fine.