Debt relief companies are definitely the last resort before filing bankruptcy. Debt from credit cards, medical bills, or other debts that do not involve collateral are eligible to apply for student loan debt. If you are under a mountain of crushing debt, then there are several options to move out of it including bankruptcy, consumer credit counseling, obtaining a loan from the bank, and negotiating settlements for less than full balance.
If settlements are negotiated for less than full balance there are a few things to know before proceeding. They include the usage of different strategies. To determine if the threat of a lawsuit is legitimate, the history of the creditor is determined first. It is necessary to understand a favorable and unfavorable settlement offer. It is also necessary to settle directly with a credit card company.
The fee charged by debt relief companies including Curadebt, Freedom Debt Relief, and National Debt Relief is based on a percentage of the overall debt total. However, the fee charged by Donaldson William is based on the amount of debt reduction. The fee structure of Donaldson Williams resulted in the largest net savings.
Though beneficial in most cases, debt settlements are not for everyone. If more than 12-18 months are taken to settle with creditors, going bankrupt would be one good option. Results are not completely guaranteed and the credit score can also be completely affected.
Table of contents
- How it affects credit
- Debt relief options
- Criteria for choosing the best company
- National debt relief
- Freedom debt relief
- Accredited debt relief
- New Era Debt Solutions
- Consolidated Credit Debt Relief
- Donaldson Williams Debt Relief
- How to choose the best
- Services offered by top debt settlement companies
- How to find a genuine debt relief service
How it affects credit?
Lightening your debt load might not always have a negative impact on your credit score. It is necessary for the borrower to understand that the debt you make makes up one-third of your credit score. So when the debt is paid off, credit cards that are close to the credit limits, improvement is seen in that part of your score.
When debt is paid off, you should definitely see improvement in that part of your score. Analysis of credit relief plans is based on generalities. This doesn’t necessarily represent what will happen in your case. When borrowers fall 180 days behind, the creditor will charge off debts. Settling an account before charging it off can prevent it from going to collections and adding a negative to your credit report. The immediate credit impact can be severe. It is also necessary to get back on track.
Debt relief options
The debt relief options that prevent you from drowning in a debt are given below.
Debt Consolidation – Taking one loan from a bank or credit union and also repaying the bank and credit union in monthly installments. This can be done with a zero-interest balance transfer to another credit card. This simplifies bill payment options by payment reduction and keeping up with payment dates.
Debt Management Program – A credit counseling agency can be approached in order to lower the interest rates and monthly payments. If payment is consistent for 3 to 5 years, then this becomes the easiest route to financial freedom. Credit score can be improved and the budget can be managed effectively.
If one payment is missed, then all the concessions that the creditors received at the start of the program would be removed. It would be enough to build a budget and creditors have to pay 50% to 75% of what is owed to settle the debt.
The credit card debt keeps rising because of late fees and interest payments. After the servicing of fees and late payments, the credit card debt keeps rising. This is a damaging negative on your credit report for seven years.
Though bankruptcy means a bad reputation, it happens for a good reason. The news of financial failure follows you for 7-10 years. Though bankruptcy is the last resort choice, it is not the end of the world.
Criteria for choosing the best company
Deciding on which form of work works best for you is essential in identifying the best relief company. One-size fits all doesn’t work for every consumer.
Before choosing the best credit counseling agency, it is necessary to identify free advice on budgeting and related options to solve the problem. Things to look for with the credit counseling agency include :
Certification of the agency by the National Foundation for Credit Counseling or the Financial Counseling Association of America
It is also necessary to find out what kind of debt that the agency works with. Most agencies deal with credit card debt and a few also work on student loans and medical debt.
Fees, additional requirements and customer reviews are identified from their websites, Better Business Bureau or any related sites.
Check out if the agency is looking out for a minimum or maximum amount of debt and the source of the counselor’s payment
The age of the firm is also checked for.
The popular debt relief companies are searched in order to find the best. The type of debt they settle, minimum debt requirements, fees, credit disclosure documentation, transparency, accreditation, and customer satisfaction.
The National debt relief must have a legitimate financial hardship, that prevents the ability to pay the creditors. The candidate should also have a minimum of $7,500 in debt.
National debt relief
Debt settlement is the premium service of the National Debt relief. The typical cost of it involves 18% to 25% of the enrolled debt. The amount of savings varies. Customer reviews are most favorable for this debt relief company. The services of this company are not available in Connecticut, Georgia, Kansas, Maine, South Carolina, Oregon, Vermont, West Virginia, and New Hampshire.
The types of debts accepted by National Debt Relief include credit cards, personal loans, lines of credit, medical bills, collections, repossessions, business debts, student loans, and more. Budget planner worksheet and debt relief calculator are available are free resources. Enrollment in a program helped them to cut down their payments by 70%.
Advantages of the National Debt Relief
No upfront fee is collected – No fee is paid until your negotiation is completely performed.
Offers a 100% money-back guarantee – Enrollment can be canceled without a penalty if you are not happy with the services of the National Debt Relief
Manages Student Loans – Student loans aren’t usually dealt by debt relief companies. However, National Debt relief puts a special focus on Student loans
Minimum debt for enrollment is low – Only $7,500 is required to be enrolled in the debt enrollment
Disadvantages of the National Debt Relief
Customer reviews aren’t always satisfactory – Though the firm claims about zero upfront fee and zero enrollment cancellation penalty, customers leave reviews that it is not true. The customer feedbacks are only a mixed bag.
Damage to the credit score – Debt settlement damages your credit score. For debt consolidation, it is necessary to preservescore.
Zero relief for secured loans – Debt with collaterals are not encouraged by the National Debt Relief
Unavailability in all states – National Debt Relief is available only in 41 states.
The National Debt Relief has accreditation in 2013. The company website uses both McAfee and Norton Security Systems to protect your information from malware attacks. The personal details are secured with SSL encryption. You are also eligible for 90 days of identity theft coverage. This is worth up to $1,00,000 after the information is entered on the site. Trade organizations including American Fair Credit Council and International Council for Professional Debt Arbitrators set standards for Debt Settlement Industry.
After you have signed up for a debt settlement under National Debt Relief, you should follow the following steps.
A payment plan is set up – A payment plan is set up for the amount that you pay into the account. Payments to the creditors are automatically done and its own fees are also deducted.
Initiate payment into the settlement fund – Monthly payments are made to an escrow account that is eventually used to pay debt settlement costs. Monthly payments here is lower than the monthly payments on debts. If you do not pay your loan installments when it is affordable, then you’ll have to pay more in the end.
Negotiation of National Debt Relief with creditors – If enough funds are there in the Escrow account, National Debt Relief negotiates with the creditors for debt settlement on a one-time payment.
Negotiation of National Debt Relief with creditors – After having enough funds in the Escrow account, negotiation is done to settle your loans in a one-time payment. Even if it doesn’t work the first time then it is totally normal.
Authorization of payment from the settlement fund – National Debt Relief pays off your debt if the lender decides to settle. The fee is also deducted from the settlement fund.
Tips to make use of National Debt Relief in the best possible way
Tips to make use of the National Debt Relief in the best possible method are given below.
Don’t add up to the debt that you already have – After qualifying for student loan settlement, do not fall into the false hope that you are in a position to take up more loans.
Always follow a budget – Advantage of the National Debt Relief should be used and a spending strategy should be used to keep from missing payments.
Keep in touch – The Customer Service Wing of the National Debt Relief would be always available to answer your queries on debt relief.
Debt Consolidation Loan, Credit Counseling, and Debt Management are some of the debt relief options to be considered. Debt Settlement should not be taken lightly. Your ability to get credit in the future can hence be affected.
Freedom Debt Relief
Debt Settlement is the premium service of the Freedom Debt Relief. Typical costs involve 20-25% of the enrolled debt. 15% to 35% of the enrolled debt after fees is regarded as the typical savings. The service of this debt settlement company not available in Connecticut, Colorado, Hawaii, Illinois, Maine, North Dakota, New Hampshire, Oregon, Rhode Island, South Carolina, Vermont, Washington, West Virginia, and Wyoming.
For this company, the monthly payment is based on the enrolled debt, without any upfront fees. The candidate should also have at least $7,500 in unsecured debt and he/she should live in a serviced state. The typical turnaround of the debt is 24-48 months and the duration can be longer.
The firm is also a member of the International Association of Professional Debt Arbitrators. The relief does not ask for payment up-front. The savings depend on the unique financial settlement and the state of residence.
Benefits of Freedom Debt Relief
Progression tracking is easy – It is easy to track your progress on an online dashboard
Helpful Customer Service – The dedicated customer service team patiently answers to all the queries of the customers
Industry standards are kept – Freedom Debt Relief is a founding member of the American Fair Credit Council, standardizes industry practices. The firm also has a hand in banning abusive debt settlement practices.
Drawbacks of Freedom Debt Relief
Few of the disadvantages of the Freedom Debt Relief Program are as given below.
The customers are sometimes at the risk of getting sued.
On average the program takes two to four years for completion.
Debt settlement is not guaranteed in this case. Sometimes the creditors will not allow you to settle your debt.
Debt Relief is available only in a few of the states. The firm operates in 33 states, three territories, Washington and DC (in those states where debt services are permitted).
Debt Settlement and Tax Settlement are the premium services of this debt relief company. Typical costs involve around 20% of the enrolled debt. Typical savings include 80% to 30% of the enrolled debt after fees. The states where the services of the Curadebt will not be available include Colorado, Connecticut, Georgia, Idaho, Illinois, Kansas, North Dakota, New Hampshire, South Carolina, Vermont, Washington, West Virginia, Wisconsin, Puerto Rica, and the Virgin Islands.
To receive benefits from Curadebt, the candidate must have verifiable income along with more than $10,000 in unsecured debt, or tax debt including payday loans. Curadebt provides free consultation on any debt relief queries.
Typical turnaround of the service is around 3 years. Upfront fees are not charged for any of Curadebt’s services. Savings from Cradebt can range from 30% to 80%. If Curadebt is unable to settle your debt at the end of the three-year program, it could end up with $17, 603 in debt. Savings can range between $5,281 and $14,083.
Higher savings is definitely an advantage of the Curadebt. Some debts are completely dismissed and some others are cut by 80% or more
Curadebt offers a tax debt relief, unlike the other debt relief companies
A unique approach is taken to negotiate your debt, first by looking for legal violations and committed by the lender to get them forgiven
The absence of transparency is a major drawback. It is because neither the website nor the staff gives adequate basic information
The website of the service provider is not up-to-date. Moreover, the design is also not appealing
Poor customer service – When they had questions or wanted to withdraw from the program Curadebt was unresponsive
Comparison of Curadebt to other debt relief companies
Different approaches taken by Curadebt in IRS Debt and back taxing are -
Curadebt comes to an agreement with the IRS and lets you pay a reduced amount to resolve the tax liability
Installment agreement focuses on smaller, manageable monthly payments
Penalty abatements go along with installment agreements and you wouldn’t have to pay as many penalties
Currently non-collectible - Collections are stopped by IRS and Curadebt helps you to prove that you are experiencing extreme economic hardships, making it impossible to pay back our taxes
An expiration debt is set on your owed tax debt by the IRS
Money from the personal asset can be used to pay off the tax debt.
Accredited Debt Relief
Bankruptcy, debt consolidation, debt management, and debt settlement are the premium services of the debt relief company. Typical costs depend on your debt relief and debt settlement fees range from 18% to 25%.
Depending on the debt relief, debt settlement clients save 25% to 32% of the enrolled debt after fees. The services of this company are not available in Colorado, Connecticut, Delaware, Georgia, Hawaii, Illinois, Kansas, Maine, New Hampshire, North Dakota, Oregon, Rhode Island, South Carolina, Vermont, Washington, and Wisconsin.
Moreover, to receive Accredited Debt Relief, the candidate must be 18 years old and should also legally be a US resident. Based on the services and products, additional terms must be applied.
There are a number of options that accredited debt relief offers. Rather than pigeonholing it into one type of debt relief, this debt relief offers a lot of options.
The always helpful staff do a great job by simplifying a complicated and overwhelming process.
Debt relief doesn’t work out as planned always. Receiving a lot of positive feedbacks mean a lot.
Different partners have different fees – The cost incurred in debt relief cannot be predicted until it is completely done.
All partners do not have a great service – As accredited debt relief matches with debt companies, getting connected with a highly ranked service
Partner companies also receive information from the Accredited Debt Relief
New Era Debt Solutions
Debt settlement is the premium service of the debt relief company. 16% o 20% of the enrolled debts are calculated as typical costs. Typical savings comprise of 43% to 47% of the enrolled debt after fees. Pennsylvania state doesn’t have the service of this company.
New Era starts negotiations earlier than the other debt settlement companies. So debts might not grow so fast while you are enrolled. This is highly beneficial for the borrowers because most of the other debt settlement companies, wait till you have saved 50% of your value of debts before starting the negotiations. Beginning earlier and negotiating with your creditors to pay off your debts in installments is also essential.
The higher rate of completion is the biggest advantage in the case of New Era Debt Solutions. Only less than 20% of the clients drop out of the program before completion. This is highly beneficial.
Discounts for military personnel and veterans are also sometimes granted. Fee discount depends on how much debt you enroll.
43 states of the country receive benefits from the New Era Debt Solutions.
Most unsecured debt can be settled with New Era. Medical bills or credit union debts are excluded.
Success isn’t guaranteed for debt settlements offered by New Era Debt Solutions. Fees need not be paid if the debt is not settled. In cases wherein you are not satisfied, you can withdraw at any time.
Fee payment is not transparent. Comparing the specific fee is difficult. However, customer service is happy to rattle off stats.
Enrollment debts that include credit union debts, federal student loans, hospital bills, mortgages, car loans, and other secured debts are not accepted by New Era Debt Solutions.
After enrollment in New Era’s Debt Solutions, a set of processes that happen is given below.
The New Era Debt Solution helps you to with a negotiator and representative, to work throughout your debt settlement program. A welcome packet with program details and directory of New Era Contact Details are provided.
It is necessary to set up an Escrow Account or third party account, for monthly contributions to tour settlement funds. It is at this point that most borrowers stop paying their creditors.
New Era requests for monthly installments on Escrow Accounts to arrange for statements to be sent directly to offices to track progress.
Once your Escrow account has enough funds to pay back to your creditors, New Era reaches out to start negotiations.
The service provider negotiates on the required monthly payments that are made to your creditors. A fee is also charged at this point.
Consolidated Credit Debt Relief
To receive Consolidated Credit Debt Relief, the debt must not be consolidated loans or payday loans. The consolidated credit debt relief offers a free consultation. This involves setting up a budget and considering that all the options are free.
Fee for the current state of residence ranges from $0 to $69 and an average monthly fee of $35 is charged. No upfront or contingency fee exists for the services offered. Types of debt that are accepted include credit cards, store credit cards, store credit lines, collections, gas cards, personal loans, and medical bills. Payday loans or secured loans are not accepted.
Mortgage or car loan is also not chosen for debt management. Debt management and credit counseling are services that are offered. There is no minimum debt that is considered for debt relief service from Consolidated Credit Debt Relief. Direct negotiations are considered.
Consolidated Credit Debt Relief offers services in all 50 states, Puerto Rico, American Samoa, Guam, Northern Mariana Islands, and the US Virgin Islands. Free resources include webinars, seminars, local workshops, educational videos, financial calculators, finance booklets, interactive education courses and more. Specialized credit counseling is also offered for service members and struggling businesses.
The credit service charges a monthly fee set by the state. Consumers would be happy to save nearly 30% to 50% of the total credit card debt. The amount of savings depend on personal situations.
One great advantage of Consolidated Credit Card Relief is that the debt relief works in all states of the United States, unlike the other debt relief companies.
There is no condition set for required minimum debt. Hence, unlike most of the other companies Consolidated Credit Card Debt Relief do not demand a minimum $7,500 for debt relief.
Positive Customer Review is the other advantage of Consolidated Credit Card Debt Relief. There are a number of instances wherein the customers have granted 9.6 on 10 ratings for the company.
Free educational resources including webinars, local workshops, calculators and interactive courses are offered.
The absence of payday debts or secured debts – As debt relief companies do not work with collateral and as no exception is granted for Consolidated Credit loan, debt relief companies do not work with secured loans.
This company is not present in the Department of Justice’s list of government-approved credit counseling agencies. Consolidated credit is also not included.
After signing up for debt management, the credit score will not typically be lowered. It will not be possible to take a new loan until you have paid off your debt.
The debt management service of the Consolidated Credit Debt Service signs up for its debt management program. Here a payment plan is designed to pay off your eligible debts. There were positive feedbacks from customers stating that the quality of service was high enough to unlock lower rates or to get out of debt.
The Consolidated Credit Debt Service has accreditations from institutions including the US Department of Housing and Urban Development, Financial Counseling Association of America, ANSI-ASQ National Accreditation Board. The firm is also an ISO 9001 company and is also endorsed by the United Way.
In order to make the Consolidated Credit Debt Relief more fruitful, a few steps that can be taken include setting a goal, sticking to your budget, checking the credit report, and being honest with the credit counselor.
Donaldson Williams Debt Relief
The company uses own, family-centered approach and brings benefits to each client based on the settlement. The charged fee is less than 17% of the total amount of debt enrolled and settled. No upfront fee is charged from the client.
There are no extra or hidden fees at all. Products are sold behind a no-upfront fee approach. No upfront enrollment fee is charged since 2006. A few of the highlights of Donald William includes the absence of hidden fees, 30%-50% lower than the industry standard, services in 42 states, a small family-owned and operated business and more.
The handle only credit card debt
Other types of debt are it secured or unsecured are not eligible to be enrolled by the program
The minimum amount of debt into the program is higher than many of its competitors
A minimum amount of debt accepted into the program is higher than many of its competitors standing at $15,000 in unsecured credit card debt
It is tough to contact a representative and no accreditation is granted with AFCC or IAPDA.
How to choose the best
The best debt settlement company can be finalized based on a variety of factors including -
Availability - The debt relief company and its services should be available in your company. There are also a few companies that do not work for student loan debt. It is necessary to identify these companies.
Minimum debt requirements - It is also necessary to make sure that you meet the minimum debt requirements as specified by the company.
Accreditation - It is necessary to identify a company that is accredited with the International Association of Professional Debt Arbitrators (IAPDA) and it is also necessary to identify if the consultant is IAPDA certified.
Cost Vs Savings - Identification of typical costs for debt settling and its comparison with typical savings are essential to identify if you are getting a good deal.
Program time frame - The duration is taken by a company to settle your debts should be checked and decided if you are not comfortable with your time-frame.
Transparency - Choose a company only if identity, how much you’ll have to pay and what damage can be caused to the credit scores. If your debt can be settled, without your credit score being affected, then be suspicious about the company.
Customer Satisfaction - Identify the customer satisfaction rate of each company.
Services offered by top debt settlement companies
Most companies offer a combination of services to set you on a debt-free path. A few of these are, as given below.
1 - Debt Management – These services focus on negotiating with creditors for low-interest rates and low payments. This is really helpful if your payments till date have been on time, but currently, you are finding it difficult to pay more than the minimum.
2 - Debt Consolidation – Debt consolidation refers to debt management. During other times, a debt consolidation loan is described by this. Before you sign-up for the plan, understand the difference between debt consolidation and debt management.
3 - Debt Settlement/Negotiation – Debt settlement involves negotiating with the creditors on the overall amount you owe. Due to this option, 20% of the enrolled debt is collected as fee and that would significantly damage your credits. This is suitable for those candidates who can’t make required payments on debts but wants to avoid bankruptcy.
4 - Bankruptcy Services – For people who can’t afford to pay their debts, bankruptcy is an option, especially if they have chosen a payment plan. Though this would create a severe impact on your credit score, this would be a helpful option if you have more debt than you can afford.
5 - Credit Counseling – Credit counseling involves granting advice on how to build your credit score and thus manage credit habits. This is highly useful for anyone looking to raise their credit score.
Be aware of the consequences of debt settlement
Debt settlement can be useful in situations where you have tried all the ways to get your debt under control, just like an application for balance transfer credit or debt consolidation loan. However, there are a few drawbacks of debt relief as well.
There is a possibility that debt settlement can damage your credit score and there is no guarantee that the program should work. Only almost 10% of people who enroll in the debt relief programs complete them.
It is also difficult to continue to pay your creditors while putting money towards debt settlement. After adding fees and interest that accumulated during the program, there wouldn’t be much savings that you expected to make.
How to find a genuine debt relief service?
There are a few questions to be considered while determining the authenticity of a debt relief service. Some of these questions are given below.
It is necessary to determine if the company is legal in your state – There a few states with regulations that prevent debt relief services from being practiced in them. It is first necessary to identify if your group belongs to one of them.
The accreditation of the company - The American Fair Credit Council or the IAPDA, sets and maintains industry standards for these types of services offered by companies. It is necessary to identify the accreditation of these companies in this case.
The age of the company – Most often it is those old companies, who would try tricks to stay on top. Customer satisfaction in the previous years and a thorough investigation of the previous experiences of the company is essential in identifying the age of the company.
Clarity of the website – If all the necessary information can be found out in a few clicks of searching the website, then the clarity of the website is analyzed
for the detailed information that is available.
Time of fee payment – Legit debt relief agencies do not ask for payment before their targets are accomplished. If in case any agency asks for any payments before receiving relief from debt, then make sure that you verify if the firm is genuine.
Control exercised over debt settlement companies - These companies pay into an account from which the debt settlement company pays the debt settlement fees. You can withdraw control from them without a penalty.
Minimum debt is identified – Enrollment of a minimum debt amount is not exercised. Most debt companies set their minimum debt band at $7,500.
Type of settled debts – Debt relief companies can settle student loans along with some secured debt. However, most of these companies handle only unsecured debts like medical bills, personal loans, and credit cards.
The advertised timeline – Debt settlement programs take two to four years. Avoiding longer terms will reduce the chances of the risk of facing a lawsuit and incompletion of the program.
The first hearing about the company – If you have heard about the company from advertisements, then make sure that the advertised promises are true. In other cases, government regulations are not followed.
Are debt settlement companies a good option?
These services are offered by third parties, although paying off an amount which is lesser than what you owe sounds good. You should understand that it is very risky and can adversely affect your credit score.
Is Debt Settlement really worth it?
Debt settlement is when you negotiate with creditors to pay less than the amount of debt that you owe. If you owe $4,000 and you can negotiate it to $2,000 then debt settlement is worth it.
How much will creditors settle for?
You should aim to settle for 50% or less. Start with 15% and negotiate upwards from there. Most creditors will settle for 30-50% of the debt.
Is it better to settle the debt or pay in full?
Depending on how you pay the amount it will be reported to the credit bureaus as 'settled' or 'account paid in full for less than the full balance'. When the amount paid is less than the full amount it will have a negative effect on your credit score.
Should I hire a lawyer for debt settlement?
In most cases, it is said to try and avoid debt settlement companies altogether. If you need help to negotiate with a creditor then it is better to hire a lawyer if you can't do it on your own.