Carrying a load of debt can be debilitating, particularly if it’s more than you can afford to pay off. The good news is that there are many debt relief programs from which to choose. Here is how to find the best-rated debt relief program, and what such a service should look like.
What Is Debt Relief?
If you’re battling overwhelming debt and can’t work out a repayment plan with creditors by yourself, a debt relief service may be able to help you regain your financial footing.
Depending on the kind of program you choose, you might be counseled about how to cope with mounting debt or establish a plan for paying back your creditors.
How Does Debt Settlement Work?
Debt settlement is a process by which a creditor agrees to accept less than the total amount you owe to resolve it.
For-profit debt relief firms usually run such plans. Program enrollment requires you to cease making payments – on your credit cards, say, — and put funds into a dedicated account.
After you have compiled sufficient cash, the debt settlement company will start negotiations with your creditors to accept the funds as a settlement to close the account.
Risks Of Debt Relief
There are drawbacks to such programs. For one, stopping payments can lead to negative credit reporting and collection lawsuits. Also, the cost of late fees, interest, and other penalties may exceed the settlement amount. Always do the math to ensure you have the potential to come out ahead.
There is also no guarantee your creditor will accept an offer from your debt settlement company. Settling debt will also worsen your credit score in the near term. What’s more, the account might stay on your credit report, with a note that it was settled for less than the full sum. You may also be required to pay taxes on the forgiven debt portion. Debt settlement firms typically charge between 15 and 25 percent of your original debt balance, so you also may not end up as far ahead as you anticipated after your fee is paid.
The best rated debt relief programs disclose all of this information you can make an educated decision.
Who Can Use Debt Settlement?
If you’re paying your bills and merely want a discount, debt settlement isn’t for you. But if you have already missed payments and your credit report has bad marks, creditors will understand they’re in danger of receiving no repayment should you file for bankruptcy protection. In such instances, lenders might be willing to settle for less than the total amount owed rather than considering the debt a loss or taking legal action.
How To Find A Program
Before working with any debt relief program, run the company’s name past your state’s attorney’s general office and a local consumer protection agency. They will be able to tell you whether the company is legitimate and if consumer complaints have been filed. Also, ask the attorney general whether the firm you’re considering is required to be licensed to work in your state, and, if so, whether it is.
It’s imperative to do your homework. Learn what the service you have your sights on provides, how much it costs, and how long it could take to get promised results. Make certain you get everything in writing and go over your contract carefully. Avoid companies that over promise, aren’t forthcoming about offerings, or ask for fees in advance. Simply put, to find the best rated debt relief program check for accreditation, compare costs, and assess their transparency about offered services.