Debt settlement programs are often a good option for people who have crushing debts and wish to avoid bankruptcy at all costs. But, the debt relief industry has been plagued by disreputable companies in the past. When it comes to debt settlement fees, there’s some things all consumers should know.
These early companies created a negative reputation for the industry and more importantly, they preyed on average consumers struggling with debt. Nowadays we have organizations like the AFCC, along with far more rigid federal regulations that ensure YOU, the consumer are protected.
This is not to say, however, that you shouldn’t do your homework on a company before choosing to work with them. A debt relief company should have a good reputation; looking for reviews and testimonials of past clients is a good place to start your research.
In this article, we’ll be sharing 7 questions that you must ask a debt relief company. Concise and honest answers to these questions can assure you it is a legitimate debt relief program and they will eventually get you out of your crisis. If their answers to these questions do not satisfy you, don’t hesitate to walk away!
What are your debt settlement fees?
Many people don’t know, but it is illegal for debt settlement companies to charge you debt settlement fees for their services upfront. If their answer includes any sort of up-front or excess fees, or a percentage prior to settling, move on . Also, your debt settlement fees should be about 18% to 25%, so you can also use their response to know if you are being taken advantage of.
How long have you been doing this?
This question helps you to determine the experience level of the debt settlement company you are working with. This question should also be followed with “How much debt have you helped settle?” so that you can get a clear picture of what they can do.
These numbers should ideally be visible on their website or other marketing material. Honest debt relief companies are transparent about their settlement stats, they should have nothing to hide.
Are you part of the AFCC?
The American Fair Credit Council is an organization that helps in debt settlement accreditation for all members. They ensure that their members perform their duties ethically and in accordance with all rules and regulations. This debt settlement accreditation organization enhances the trust of people who wish to work with one of their members.
So, if the debt settlement company is not an accredited member of this organization, you might have a little reason to worry. Note that it is not required by law to be a part of the AFCC, good settlement companies acquire this accreditation independently.
Can you guarantee that I won’t get sued?
No legitimate debt relief company can make this guarantee. If the debt settlement company guarantees you that you won’t get sued by your creditors, you should think twice. In fact, legitimate debt relief companies will have a process in place to coach you through this when or if it happens.
How will you make the payment to my creditors?
Debt settlement companies settle your debt in one lump sum, or a few monthly payments. If a debt settlement company tells you that it can pay your creditors monthly to prevent them from taking legal action against you, then that company is not a legitimate debt relief company.
Once you’re in a settlement program, the company is not paying your normal monthly payments. They are building your funds in an escrow account to settle your debts at the right time, and for the right amount. This is where the experience comes in, and why that question is on this list.
When will my debt settlement be completed?
They need to give you a time frame that is specific to your debt alone. No one can make assumptions by comparing your case to other people’s cases. A good company will work with you to build a settlement path that not only works for you, but gets you out of debt as quickly as possible.
Don’t forget, they aren’t making any money until they settle your debt.
How much of an impact will it have on my credit score?
Debt settlement will usually have an impact on your credit score, and the debt settlement company should be transparent and clear on that. A trustful company will be able to explain to you how and why your score may drop, and also how it will recover. If they don’t (or can’t) then it’s probably not a legitimate debt relief company.
Asking these questions will help you determine if the company you’ve chosen is following federal regulations, honest, and has their accreditations in order. While there are many out there to choose from, some of the most reputable we’d reccomend are Consumer First Financial and Freedom Debt Relief.