In 2002 there were a total of eight debt relief programs in business. Today, there are at least 2,000 due to the recession. The U.S. government has implemented laws in recent past to protect the consumer from the rise of numerous debt relief scams, but consumers should never get complacent – do your homework when selecting a debt relief company.
When you’re neck deep in debt ($10,000 and more) you sometimes become desperate, and if you’re not careful you may be taken advantage of by a debt relief company and end up in worse condition than when you started the process. It’s best to first see what you can do to help relieve yourself of some of the debt without a third party, but sometimes there can be too much to manage and you need lower payments just to survive. Others want to be able to sleep at night without being hounded by their creditors, and some want to be debt free in three years or less. Whatever the reason you are considering a debt relief program you will read some important tips below to consider when selecting a program that is right for you:
1) Ask a lot of questions during the consultation and get the answers in writing. Some companies will initially make impossible promises (i.e. “You’ll be debt free in less than a year.”) just to get you to sign up.
2) Some people suggest only using a non-profit organization, but be aware, just because they tell you that they are non-profit doesn’t guarantee that its services are for free. The non-profit pitch can make a potential client feel confident about signing up. Then, once the company has the consumer’s trust, the client lets their guard down, assuming they are getting the best deal and everything will be taken care of. Those are the ones that turn my stomach. Do your research when selecting a good debt relief program, then you can relax.
3) The debt relief company should save you at least 40% of your debt, including all expenses (fees and creditor payments). Avoid companies that claim they can save you 60-70%.
4) The debt settlement company should focus and emphasize on you being debt free in 1-3 years. Remember, you have accruing interest on your credit cards.
5) The company should be reputable. I would personally focus on companies that have been in business for over 10 years because these programs have legitimate experience settling people’s debts. This should also narrow your search down to about eight or less debt relief companies from the initial 2,000. Most scams stem from programs that have only been in business for a few years.
6) I tend to value what past customers have said about the company; hence the number of filed complaints. I would then compare those eight or so companies from your narrowed search and look at their number of consumer complaints. You may check the BBB (Better Business Bureau) for these valuable statistics. Many suggest going by the grade given to a debt relief company associated with the BBB, but those grades often confuse me, personally. For example, one company may have a very low number of customer complaints compared to another, but received a much lower grade. One such example exists between two experienced companies below; however I’m keeping their names confidential. The example of grades below were conducted by the BBB over the past three years.
Red Company………Grade (D-)………#Complaints (24)
Blue Company………Grade (A)……….#Complaints (67)
The only possible reasoning I’ve been able to conjure up for these contrasting statistics is that the Red Company had a few unresolved complaints, according to the BBB. However, the Red Company has been around since 1996, and is still one of the top relief companies in business today. They also have an extremely low number (24) of complaints compared to most other programs.
7) You should always get a free consultation from a debt relief program.
8) Make sure you are only charged a commission on your debt savings. That way, they don’t get paid unless they save you money.
9) I mentioned this one earlier (#1), but I’m reiterating it because it is imperative before agreeing to terms with a company. Make sure you get a written guarantee of what you will save in their debt reduction program.