Sometimes, we need help overcoming debt.

When your debt becomes out of control and you don’t know what to do, the best option may be to seek a credible debt relief company. It’s a given that debt settlement may affect your credit, but most people would agree that it’s a better option than bankruptcy.

Now the question is, how can you determine the legitimacy of a debt settlement company? A bad choice may lead to further debt issues, or worse, hefty fees that you can’t afford. Luckily for consumers, heavy regulations have been imposed on the debt relief industry. This certainly doesn’t mean you’re safe, but it does make it easier to find a credible relief company.

While there’s regulations, it’s our job as consumers to find a credible debt relief company.

Let’s discuss the do’s and dont’s of choosing a debt relief company. These questions will help consumers determine if they are legitimate and trustworthy. But, before we get to “how” to choose a company, ask yourself…

Do I need a debt relief program?

If you find yourself struggling with unsecured debt such as credit cards, unsecured loans, medical bills, etc. – debt settlement is a good option for you. Generally speaking, you’ll get the most benefit from a settlement program if your overall debt amount is high. The higher the debt, the better the opportunity for reductions.

The advantage of these companies is that they have trained professionals who negotiate the settlements strategically, to satisfy both parties.

The negotiators have resources to achieve a maximum reduction on your debt.

Because of high interest rates, unsecured debt specifically takes a VERY long time to pay off. And, you end up paying significantly more for credit. Debt settlement offers a quick, interest free path to eliminating this type of debt.

Research about Company’s Credibility and Reputation.

There are a number of companies who are eagerly waiting to trap customers by their false promises. Make sure you are not the one to fall into such pits by ensuring to check the reputation and credibility of these debt settlement companies.

You can achieve this by doing a bit of research and checking their licensing. Credible debt relief companies should be licensed with the Department of Consumer Services and accredited through The American Fair Credit Council.

Terms and Fees charged.

Debt settlement companies are prohibited from collecting any type of up front fees or charges before they settle your first debt. So, you can eliminate any company from your list right away if they ask for a fee up front.

Be sure that the company explicitly specifies the fees they charge and the conditions they apply during the settlement of your debts. Most legitimate settlement companies will charge a percentage of the settled amount. The payment is not additional to you, it’s factored into your single monthly payment in your settlement program.

Beware of the shady procedures and requests.

A settlement company might ask you to keep your funds in a separate bank account. Always bear in mind that these funds are still yours and you are solely entitled to any interest. You can also access and maintain this account at any time. In other word, if a settlement company doesn’t give you full control of your settlement account, look elsewhere.

A settlement company should always contact you before completing a settlement. Remember, they are working on your behalf, so always be notified before a settlement is agreed upon.

Check the highlights of the debt relief program

Before trusting any company to shoulder the settlement tasks, make sure you review the minimum checkpoints listed below. Never fall trap to the debt settlement companies who:

  • Boast a “new real debt settlement program” and asks you to pull out your personal credit card. (this is not to be confused with verifying your bank account, which is a common practice of settlement companies to ensure they can open the debt savings account for you.)
  • Guarantees that your unsecured debt will be paid off by a specific date.
  • Suggests to stop communication with your creditors without fully explaining why this is necessary and how it will affect you.
  • Guarantees the payment of your unsecured debts for excessively low rates. A good settlement company will get you a good reduction on your debt. But, if a company tells you you’ll pay $100 of a $10,000 debt, you can rest assured they are not being honest.

Ensure availability of Guidance whenever needed.

So you’ve decided on a settlement company. A good first inquiry is the guidance they provide in case of any disputes or settlements with creditors. The consultants of such companies should be able to guide you and provide clear advice on what to do. They should also educate you about the negative consequences, including potential credit score impact. If a debt relief company tells you your credit score will absolutely not be affected, it’s a  red light.

Responsibilities and procedures of the company.

The debt settlement company should calculate an affordable monthly payment amount needed for successful debt settlement. They’ll analyze your entire financial situation. The process can be tedious, but it’s necessary to be sure it works for your budget, and also allots enough funds for them to do their jobs.

Struggling with tensions of debt payments is no doubt an overwhelming affair. It need not be one. By making yourself equipped with thorough and clear knowledge of settlement procedures you can ensure better financial decisions for your future.

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