Last Updated on: 21st November 2023, 09:02 pm
You can’t go another day without doing something about all that credit card debt that’s been piling up. You’re weighing your options, which include debt relief. But is debt relief a legitimate strategy? Well, it’s helped scores of consumers like you back on their financial feet. But don’t just take our word for it, let’s look.
What is Debt Relief?
It’s a financial strategy in which you get a company that specializes in debt settlement – another term for debt relief – to go to your creditors on your behalf to see if it can get them to let you “settle” your debts for less than what you owe.
Why would a creditor agree to this, you ask? Well, it’s mostly because such creditors – usually credit card issuers – can see that your credit is damaged and that your other option is bankruptcy. If you employ that, they’ll likely get nothing.
How Does Debt Relief Work?
After an initial consultation with a company such as Freedom Debt Relief, during which your financial situation is assessed, you’ll get a personalized plan aimed at erasing your debts. If you look at recent Freedom Debt Relief reviews, you’ll get a better about such plans.
After the plan is crafted, you’ll then be asked to deposit funds monthly into an escrow-type account that you control. Once you’ve saved sufficient cash – the amount will be determined by your debt load and ability to pay – the company will begin negotiations with your creditors. Rather than pay your creditors directly, settlement funds will come from your account. Note that each account will be negotiated separately.
How Long Does Settlement Take?
It usually takes between two and four years – much less than what it would take if you’d just make minimum payments. It largely depends on how much debt you owe and your ability to build up savings.
Does Debt Settlement Affect My Credit?
You will have a temporary downturn – emphasis on “temporary.” Once you’re done with your debt relief program, your scores will rebound. That’s as opposed to bankruptcy, the filing for which can hang out on your credit report for up to 10 years.
How Much Does Debt Relief Cost?
These companies usually charge between 15% and 25% to handle your debt. Some companies base their fee on the amount of debt enrolled, while others will bill you a percentage of the total you’ve agreed to pay.
Isn’t the Industry Rife with Scammers?
No — most debt settlement companies are on the up and up. However, the industry does seem to attract its share of bad actors who are more interested in getting your money than improving your financial state. In short, they’re eager to take advantage of your vulnerability as well as your eagerness to get out of your problem.
To avoid being taken by such a company, run away fast if it asks for payment up front. Not only is doing so unethical it is illegal to be billed before negotiations are done on your behalf. Companies should also be transparent about their fee structures.
You should also turn back any company that withholds program details unless you provide info such as your credit card numbers and balances.
An additional red sign is “over promising.” While debt settlement is a proven approach, no company can guarantee it can settle all your debts for a specific amount and by a date certain. Negotiations are by nature unpredictable.
So, is debt relief a legitimate strategy? Totally. In fact, it has saved scads of consumers from financial ruin. To avoid bankruptcy, which you do want to, debt relief is likely the best option available.
