—
If you are like most Americans, you are probably in debt. Credit card debt alone reached $905 billion in 2017, up 8 percent from the previous year according to a NerdWallet report. The average household carrying debt pays $904 in interest annually.
Whether you’ve fallen victim to unnecessary spending, burdensome student loans, or unforeseen medical costs, living each day drowning in credit card debt is no way to live.
Depending on how much you owe, you could be a good candidate for debt management, debt settlement, or debt consolidation. But how do you know what options are best for you? It helps to work with the right debt relief consultancy.
Here’s what you should know before looking for help:
Know Your Debt
It sounds surprising, but many people with large debt don’t know the exact number they owe. On one hand, living with a constant figure in your head can only complement the barrage of phone calls and mail in the worst. On the other hand, if you don’t know exactly what you owe, how will you ever put an actionable plan in place to solve it? Knowing your total debt isn’t enough though. You need to factor in your monthly interest rates and available income to determine how in over your head you are. Once you determine an accurate number, you’ll have a better idea of whether you need settlement services.
Debt Relief Fees
Every debt relief company will charge a percent-based fee for settling your debts. Fees usually range as low as 15 percent and as high as 30 percent. The range is high because no company, no matter how reputable, can guarantee the fate of your debts. A company should be able to give an estimated time frame and debt savings, but exact details are difficult to know.
Your debt fee should also only be charged after the settlement meets three conditions, per the FTC:
- The debt relief provider reached a successful result for the customer
Either through renegotiation, settlement, reduction, or other action that changed the terms of at least one customer debt.
- The debt relief provider and customer have an agreement
The creditor’s agreement must be in writing, but the customer can agree orally. No blanket pre-approval fees for settlements are allowed
- Customer paid the creditor
At least one payment to the creditor or debt collector as part of agreement.
The Company’s Transparency for Settling Debt
After you know a company’s settlement fees, it’s imperative to get an idea of a company’s debt settlement track record. According to credit.com, it’s not uncommon for companies, especially new ones, to not settle much debt. Don’t accept a few complimentary testimonials as proof of the company’s legitimacy. They should have no problem giving you more in-depth stats of their past successes. Many large companies have the advantage of having reviews online to let consumers choose for themselves. However, even with the wealth of customer insight available online, it’s always worthwhile to call around and get a sense of each company’s transparency with how they answer questions and present information.
How Long the Process Will Take
Debt relief companies probably won’t be able to predict how long the settlement process will take, but good consultancies should be able to offer a timeline. The timeframe should take a year minimum but could take as many as four years. For example, Freedom Debt Relief consultation states that their debt relief process can take anywhere from 24-48 months or even more, depending on the amount of debt. You should be to get a more accurate answer than that once a company understands the specifics of your debt situation. Also, beware of any settlement company that promises a very fast turnaround. Only shady companies promise something they can’t guarantee.
In the end, debt relief companies aren’t for everybody, but they can be a solution. While fees certainly can be costly, these companies still offer the potential to save you anywhere from 20-50 percent off what you owe creditors. And wouldn’t that be a sigh of relief?
—
Some links in this post may be paid.
Photo: Getty Images
