It sounds like a dream…
When you are drowning in debt and you hear that there is a company that can reduce and even erase your debt for less than you owe, it’s like seeing the searchlight on a rescue boat coming towards you… sweet relief! However, before you grab hold of that rope or floater, here are a few things you need to consider.
What exactly do these companies do?
Debt settlement companies start negotiations with your creditors on your behalf with the aim of reaching a settlement amount that you can pay to have your debt resolved. This amount is usually less than what you owe and it is payable all at once.
What these companies advise you to do is to save a specific amount of money every month, which you then transfer to another account with the company. Once you have accumulated enough money, it pays off the settlement and you are home free. Another requirement of these companies is that you will not be making your monthly payments – just focusing on reaching those monthly savings targets.
Where can you find one?
Well, virtually anywhere. The challenge with finding a credible debt settlement company is that you could fall into a scam and end up in more trouble that you were in before. Therefore, here are a few questions you need to ask in order to find the best debt settling companies:
These are for-profit companies so you will pay a certain amount as charge for having your debt reduced. However, a credible company should not charge you a single penny until it has reduced your debt. If a company asks for a fee before starting the work, run! It could call it maintenance fees or monthly fees but do not be fooled, you should not pay a cent until the debt has been reduced.
#2 Registrations and Affiliations
Make sure the company is a member of a credible national credit council and professional arbitrators of debt. It needs to have all the certification and you can check with these associations just to be sure. This will assure you of good practices and professionalism in the handling of your debt negotiations.
In any business transaction, you need to know where the point of no return is, where you can no longer cancel the agreement. A good company should give you about 3 to 5 days to decide whether you want to work with it or not. If you change your mind after that set time, you will pay a cancelation fee. So be sure to ask about the rescission period.
#4 Are they doing the work?
Some debt settlement companies, especially those claiming affiliation with law firms, may be handing over your negotiations to another company. You need to ask whether the company is a full service organization that will personally handle all your negotiations. Otherwise, it may neglect you and your debts will only be increasing in the meantime.
#5 Money-back guarantee
A money-back guarantee is a demonstration of confidence in the work that the company does. If it doesn’t have it, maybe you should look elsewhere.