With increasing financial consciousness and investments, the number of debt-ridden people is also increasing. In such scenarios, debt relief companies help consumers avoid bankruptcy and get their credit back on track. Moreover, several debt relief companies act as debt settlement companies and fulfill the ultimate goal of helping people settle their debt for less than what they owe. Although these companies do not offer free services, they charge a significant amount of fees.
Debts can be overwhelming. Therefore, reaching out to a third party can be helpful and an appropriate option. In this blog, we will discuss what is the actual work of a debt relief company and how they help consumers in settling their debts in a convenient manner. We have also enlisted some of the top debt relief companies that are offering comprehensive services and solutions for debt settlement.
What are debt relief companies?
A debt relief company is a business that negotiates with creditors on behalf of people to attempt to reduce, cancel or settle their outstanding debts. In addition to debt settlement, some debt relief companies offer options such as debt management plans and debt consolidation.
With debt settlement plans, consumers are required to stop paying debts during the negotiation process, which can cause further damage to their credit scores. Debt settlement companies justify this by informing consumers that the hit to their credit is temporary and that settling their debts will help boost their credit score in the future.
How do debt companies work?
Generally, a debt settlement company sets up a savings account in which people with debt can deposit money for a designated period of time. Later, the company uses this account to prompt a negotiation, or even a settlement, with people’s respective creditors.
Specifically, the idea is to convince the lenders that these people with debt are unable to pay back the borrowed amount. Therefore, receiving funds from the savings account is better than getting no money at all should you declare bankruptcy. Debt settlement companies often charge 15-25% of the amount of your debt for their services, as well as expensive fees for maintaining the savings account.
Factors to Consider while choosing a Debt Relief Company
The most important criteria for choosing a debt relief company is deciding which form of debt relief works best for you. There is no ‘one-size-fits-all’ solution that works for every consumer.
In case you want to try debt consolidation, debt management programs or DIY, you should seek a nonprofit credit counseling agency. These agencies can provide you free advice on budgeting and other options to resolve your debt settlement. If debt settlement is your preferred debt relief option, all the same considerations apply, but there are a few more criteria involved before choosing a company.
- Is debt settlement legal in your state?
- Ask about the fees for their service. Debt settlement companies are not permitted to charge upfront fees. They can’t collect any fees until they’ve settled a debt.
- Is the fee based on the original debt amount or the settled debt amount?
- What impact will debt settlement have on your credit score?
- What happens if creditors don’t accept your settlement offers?
How to verify a Debt Relief Company?
There is an old saying which goes: “Trust but Verify”. This saying is completely applicable while you are on the lookout for a Debt Relief Company. Here is how you can verify a company’s reputation:
- Ask the CFPB if there are any complaints against the company you’re considering and how those complaints were handled.
- Contact the attorney general for your state and ask the same question and whether any action has been taken by your state against a company.
- The Better Business Bureau is a source for good and bad consumer experiences with a company.
- There are consumer review websites like TrustPilot.com where people talk about their experiences and give the company a rating, good or bad. Look closely at the reviews and you will get a better feel for how trustworthy the company is.
Nevertheless, do not be afraid to ask relatives or friends if they have any experience with debt relief companies. If someone you know has turned their financial fortunes around with help from a debt relief company, it would pay to know who the company was and how they solved the problem.
Top Debt Relief Companies to watch out in 2022
Below is a list of the top 6 Debt Relief Companies that provide a path out of debt that could result in you paying less than what you owe.
- National Debt Relief (For overall debt relief)
- Accredited Debt Relief (for Debt settlement)
- DMB Financial (For High-Interest Credit Card debt)
- CuraDebt (For Tax Debt Relief)
- New Era Debt Solutions (For Customer Satisfaction)
- Freedom Debt Relief (Interactive Program)
For years, Debt Relief companies have been helping people with debt settlements. Reaching out for help to settle your debts isn’t always easy, but it’s often the only option for consumers who can’t seem to change their circumstances otherwise. If you find yourself in this position, the best thing you can do is spend some time carefully comparing your options.
The best debt relief companies can take on most of the grunt work for you, but remember that it’s your credit and your money that are at stake.