If any generalization should hold true, it’d be that Americans are in debt. Overall credit debt rose six percent to an estimated $911 billion at the end 2018 Q1. Households with credit card debt had an average of $15,432.
The numbers are grim, but with monthly interest rates as high as 25 percent, it’s easy to see how debtors can quickly fall behind without an aggressive repayment strategy.
However dire the credit card debt problem in this country seems, a few solutions still exist for those with more debt than they can pay back. When a balance has ballooned out of control, debt relief and bankruptcy can help.
In the case of declaring bankruptcy, you’ll want to consult with an attorney. But as far as debt relief goes, consider the following criteria for choosing a debt relief partner.
Accreditation is easy to look for and serves as a supplemental stamp on the legitimacy of a debt relief company. Any debt relief partner you consider should be accredited by the American Fair Credit Council (AFCC). Also look for accreditation by the International Association of Professional Debt Arbitrators (IAPDA).
Most debt relief company will appear capable of settling your debt. To decide if they’re truly right for you, see what past customers had to say. Sites like ConsumerAffairs provide detailed ratings and reviews on debt relief companies, in addition to company overviews from HighYa and TopTen reviews.
What Are Your Fees?
Every company will have similar costs, but make sure you know what you’re agreeing to pay should they be able to reduce your debt. Debt relief companies’ fees typically range between 15–25 percent, depending on the amount of debt and creditors involved. While paying attention to fees shouldn’t be a driving factor in your decision, it can help you sniff out scammers if you encounter extremely low or high percentages — or if they ask you to pay fees upfront before any debt is settled.
Business Track Record
You want to do business with a company that’s been around. The debt settlement process thrives on experience and the ability to work with creditors. An established company with a long track record of settling debts will be easier to work with and probably have better results than a company that’s only been around a few years.
Credible debt relief companies will check the boxes with favorable reviews, accreditation, fees, and no upfront payment. But where these companies start to separate from each other is in their transparency. Be sure to speak with any debt relief partner you plan on working with to get a sense of their straightforwardness.
How patient are they in explaining things to you? When you ask questions, do they answer them clearly? Do they focus on educating you, or selling you on their service? Are they clear about the fact that debt settlement will hurt your credit? Do they explain how the process actually works? Considering any debt settlement process will take a few years to resolve, you want to enlist a trustworthy company who’ll have your back and not keep you in the dark on specific details.
It also helps if the company has a public image. For example, Andrew Housser, CEO of the Freedom Financial Network writes personal and SMB finance pieces and shares advice on practicing good financial hygiene through outlets like LinkedIn, Inspirery and Ideamench. If the company you’re vetting isn’t clear about who makes up its team and who its leaders are, then that should be an indicator that the company might be involved in shady tactics.
Where’s My Money Going?
When you work with a debt settlement company, you’ll be halting your monthly payments to creditors to save a lump sum. The stop in payments is used for leverage to get creditors to accept a lower amount to resolve your debt. Even though you’re making monthly contributions to save up enough for payment, you should always have access to this money. A company that doesn’t allow you to control your money is one to avoid.
When starting out, the search for a debt relief provider can be confusing. A debtor is already overwhelmed enough by their financial situation, then add the countless companies that appear via search promising to take the reins and cure your debt for good.
Ensure you make the best decision for your situation by taking your time, reviewing companies for the steps above, and listening to your gut instinct. After all, if it feels like a scam, it probably is one.