Debt relief companies, or debt settlement companies, are in business to help people get out of debt. They often make themselves sound like superheroes when in reality they might not be doing anything for you at all. Let’s explore what debt relief companies are and what their pros and cons can be!
Debt Relief Companies
Debt relief companies are business-consulting firms that offer their services to individuals with an unreasonable amount of debt. These firms assist people in understanding their debt and help them find better ways to manage it. They also provide debt consolidation and negotiations on behalf of the clients, as well as credit counseling and advice on any bankruptcies or other legal proceedings related to debt. They can charge a fee for this service. Or they can work for a percentage rate of what’s paid off the total owed.
With regards to costs, some companies may charge a one-time fee while others may require a monthly retainer. Some may charge upfront fees and then waive them if they don’t receive payment from their clients. Others may just tack extra fees on the total sums that would come from a debt-repayment plan.
Why Someone Might Need A Debt Relief Company
For people who have spent years drowning in credit card bills, accumulating other forms of personal debt, and facing interest rates that refuse to go down, they may be at their wits’ end and just don’t know where to turn. If they’ve gone through a divorce and incurred alimony and child-support debt, or if they’re stuck paying off their mortgage for longer than expected because of foreclosure or unemployment, those kinds of situations can create some unbearable financial hardships that feel like you’ll never get out from under.
For some, just hearing the term “debt relief” sets off a panic attack. This is because it’s being offered by someone who has already been paid to look into a solution. Debt relief companies often charge a fee for their services upfront, so there is a risk there. You take out your wallet and hand over the money only to have them disappear into thin air. Or, even worse, you get on the phone with them and they simply do nothing for you at all.
But let’s be honest here. If you’re in debt up to your eyeballs and just don’t know what to do about it, who are you going to trust? You’d probably rather reach out to someone who is already in the trenches. Someone that has had some success at helping people like you. If that someone happens to charge a fee for their help, whether it’s a one-time payment or on an ongoing retainer basis, do you think they’d still be in business after all these years if lots of people were outraged by what they were charging?
Pros Of Hiring A Debt Relief Company
Many of the local and national debt relief companies have been around for more than a decade. So if they were a fly-by-night operation it would have come to light by now. They’ve proven themselves over time as far as being trustworthy goes, which is something you should consider before approaching one on your own. These kinds of firms often have years of experience with people who’ve gone through similar situations. They know the ins and outs of what’s available in terms of resources like credit counseling, consolidation of debt, and refinancing your mortgage for a lower interest rate.
Cons Of Hiring A Debt Relief Company
One of the major cons of working with a debt relief company is that you’ll likely have to pay their fee upfront before anything is done for you. Perhaps, more importantly, is that they usually want you to stick it out with them for several months or even years if possible. This can be problematic when coming out on top might mean having to put off bills indefinitely while under their plan. Some companies are so new that all they have are promises but no proof yet. That makes it hard to trust them with your money.
Types Of Debt Relief Companies You Can Trust
A good debt relief company needs to have kind staff who work diligently behind the scenes to come up with a solution for people in need of assistance. They should offer free consultations, affordable prices, and flexible payment plans. Their goal is to empower consumers by giving them options they otherwise didn’t know were available. In this sense, a good debt relief company becomes an ally that can help you regain control of your financial situation.
There are several kinds of companies that specialize in offering debt relief, including those that work with credit card companies and those that deal specifically with student loan debt. Some offer just one type of service, while others offer more than one. For example, some firms will negotiate lower interest rates or fees for people seeking to consolidate their credit card bills. But, they may not be equipped to handle other types of debts like medical bills or foreclosures on their own.
Before Choosing A Debt Relief Company…
The first thing you need to do before choosing any kind of company is to stop making payments on all of your accounts immediately. If you already have, tell your creditors that you are considering hiring a debt relief firm and ask them if they will freeze the interest rate for six months or more. If they agree, then that means there is no harm in at least consulting with one of these companies. Do some research first before committing yourself to any kind of company.
If you’re in the kind of debt where bankruptcy is an option, should you spend months or years trying to work things out with a debt relief company first? Absolutely not! Save yourself the aggravation and go straight for the jugular by filing bankruptcy first. You can always turn around later and hire one of these companies if you’re denied for any reason. When you find someone that takes care of business but also has your best interests at heart, stick with them until they’ve gotten all of your bills paid off. Only then should you fully trust them with your wallet.