You can’t go a day without hearing a debt relief ad of some sort. They’re on television, radio, in newspapers, there was probably one on your home page when you opened your browser today. They sound too good to be true.
“We guarantee to settle your debts for pennies on the dollar.”
“Our special relationships with the credit card companies can save you from bankruptcy.”
“The banks got their bailout, now it’s your turn!”
As if someone were going to just pay off you debts.
What Debt Relief Should Accomplish
Let me start by saying this: debt relief is something that every individual can do for themselves. All they need to do is invest the time and energy needed to negotiate settlements with their creditors, and stick to a plan that pays them off. I’m not going to pretend like it’s not a pain in the ass to deal with these people, but that doesn’t mean it’s impossible.
People turn to debt relief because they’re not up-to-date with all of the relevant laws and more than likely because they’re already fed up with their creditors. Having to take even one more phone call from them boils their blood.
For those that choose a debt relief company, there are a handful of benefits that they can provide. They can help you end the harassing phone calls by using a cease & desist letter that’ll indicate that all communication regarding your account should go through the company, not you anymore.
They can negotiate with your creditors the same way that you can. The advantage is that they probably have experience dealing with those creditors repeatedly, so they have an idea of how low of a settlement offer they’re willing to accept.
What to Watch For
The first red flag should be a guarantee of any kind. There’s no possible way that a debt relief company can guarantee that they’ll settle your debts for a specific amount. The truth is that most creditors are eager to settle, even if that’s for less money than you owe them. This is because they know that the longer you go without paying the less likely it is that they’ll receive any money at all. Still, there are no guarantees!
Beware of companies that require you to have a minimum amount of debt. They’re only doing this because they charge a percentage of your debt, and below a certain amount they don’t feel as if they’re profiting. Right from the start they’re worried more about their bottom line then they are about helping you out of debt.
“One-Low Payment” types of programs are promising too much. There’s no way for these debt relief companies to know how much creditors will settle for beforehand. Each outstanding debt is best looked at individually. Lumping every client and every creditor into their “simple formula” is a recipe for failure.
Do Your Homework
If it seems too good to be true, well it probably is. Take a step back and don’t be afraid to ask around as to whether the promises that you’re hearing are even possible.
Shop around for better prices. The industry standard is to charge 15% – 18% of your total debt, but there are reputable companies out there that’ll do it for 5% regardless of whether your debt’s a hundred dollars or a hundred-thousand dollars.
Make sure you read up on any company’s history. The Better Business Bureau is obviously an invaluable resource. Try to stick with the “A” graded companies. If you have questions, don’t be afraid to ask before you invest more of your hard earned money with a debt relief firm. They’re supposed to be getting you out of debt, not making the situation worse. Any respectable company shouldn’t have a problem with answering every last question that you might have.
