Evaluating Debt Settlement Programs

A debt settlement program may be the solution you need if you’re tired of collection calls, minimum monthly payments that never seem to pay off your debt and constantly struggling to make ends meet. These programs help you get out of various types of debt for less than you owe, without the hassle of trying to negotiate on your own. This guide to evaluating debt settlement programs explains how they work so you’ll know what to expect when you interview potential advocates.

What is Debt Settlement? 

Debt settlement representatives act as a third-party who is authorized to speak with creditors about the status of your accounts, access the balance of your accounts, and negotiate repayments. 

When negotiations are successful, the negotiated amount is often less than the original amount owed. Legitimate debts are reduced when creditors agree to “settle” for a lesser amount. The result is that debtors pay a reduced amount to settle their outstanding debts with creditors. 

Risks Of Using Debt Settlement Programs 

While using a debt settlement company can temporarily stop your creditors from calling, you’re still financially responsible for the outcome.

This means if debt settlement companies are unsuccessful in negotiating lower payments for your debts, you could be on the hook for even more money in the form of late-fees, taxes, and other penalties. 

Your creditors aren’t required to accept an agreement or speak with a third-party on your behalf. The success of debt settlement outcomes is contingent on the willingness and cooperation of creditors. 

If the debt settlement company helps you settle some — but not all of your debts, you can still be charged a portion of the contingency service fee. 

Benefits of Using a Debt Settlement Program

As mentioned above, the biggest benefit is that you can clear your debts for less money. This is especially critical if you’re having difficulty getting ends to meet. You’ll also usually clear those debts in less time, as lower balances are easier to manage. 

While the process of debt settlement can have a negative impact on your credit score, odds are if you’re in a situation in which debt settlement is a viable option, your credit score has already taken a serious tumble. 

Either way, settlement is better than bankruptcy because you can answer no to the question “Have you ever filed for bankruptcy protection?” on subsequent loan applications. A bankruptcy filing stays on your report for 10 years, while settlement usually drops off after seven. Plus, you can ask no negative report be filed if you fulfill the settlement terms. Some lenders will agree to this.

Debt Settlement Services – Costs And Fees 

The costs for debt settlement services vary according to the amount of debt settled.  Debt settlement companies charge their clients a percentage of the total amount of debt resolved. Be careful of any company that tries to charge you a fee before providing services. Debt settlement companies are forbidden by law to charge for their services until they’ve settled an account and it is paid in full. 

Read The Fine Print

If you’re thinking about reducing your debts by using a debt settlement company, be sure to read your contract carefully to uncover any hidden fees or service charges. When you learn about debt settlement programs at freedomdebtrelief.com  and other similarly reputable sites, you’ll see they are up front about all of the charges and fees. Less reputable firms will try to hide things in small point type. It’s important to understand what is (and isn’t) included in your debt settlement agreement to avoid inadvertently incurring more debt. 

Do Your Due Diligence

Key questions to ask when evaluating debt settlement programs include: 

What kind of track record does the debt settlement company have? Do they have a long history of complaints and unsatisfied customers? These are all red flags and signs that a debt settlement company may not be providing the services it’s promised to clients. 

What accrediting institutions endorse them? The best settlement companies are affiliated with industry organizations such as the American Fair Credit Council. Taking the time to carefully scrutinize a debt settlement company can be the difference between a dream come true and a never-ending nightmare.

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