Finding yourself in need of debt settlement services can be somewhat — well — unsettling. Generally speaking, by the time you arrive at that conclusion, you’ll have spent months trying to figure out a way to get steadily mounting debt back in hand.
This can be quite nerve-wracking and make you prone to leap at the first opportunity for relief you encounter. Given there are more than a few people out there angling to take unfair advantage of problems like yours, it’s a good idea to take a look at how to find honest debt settlement help.
What is Debt Settlement?
In the simplest terms, a debt settlement is an agreement between you and a creditor to consider a financial obligation satisfied if a certain set of parameters is met. In most cases, you’ll promise to provide a one-time payment in full of an agreed-upon amount, in exchange for a lender waiving certain aspects of the debt.
These can include accrued fees, interest charges and even a portion of the principal amount of the loan. Working with a debt settlement company, you’ll have a professional conduct the negotiations on your behalf to try to arrive at the most favorable terms possible.
Here’s the thing though, in order to make those one-time payments in full, you’ll have to build up a settlement fund. In most cases this is accomplished by depositing the money you would have used to pay your creditors into an escrow-like account. Payment to satisfy the agreement is made from this fund, once the balance of the account is sufficient to do so.
The Potential For Malfeasance
Debt settlement opens you up to a couple of potential issues. First of all, your creditor will report those “missed” payments to credit bureaus, which will cause a decline in your credit score. Second, unscrupulous firms will take that money and string you along, pretending to work on your behalf, while actually doing nothing at all. People have found themselves in even deeper trouble as a result of failing to properly vet a settlement company before agreeing to do business with them.
Key Red Flags
The good news is most of the entities operate from the same playbook so they can be spotted when you know the signs for which to look. In other words, be wary of the following:
A legitimate firm will start by providing a free consultation, during which your finances will be evaluated to determine if settlement is a good fit. Any company trying to sign you up before completing this step is probably up to no good.
Finding a slew of negative reviews when you run a search string such as “Is Freedom Debt Relief a scam or legit?” Should be cause for concern. Yes, there will always be a few people who are less than satisfied, but the overall trend should be positive.
It is illegal for debt settlement firms to bill you before providing a service. In fact, they cannot bill you for settlement activities at all until an actual agreement is reached, agreed upon by you and paid in full. Somebody asking you to disburse a settlement fee before reaching an agreement to which you authorize payment is operating outside of the law.
By and large, honest settlement companies, while they do advertise, will not contact you directly to offer their services. Meanwhile, scam artists tend to conduct telemarketing activity along those lines.
Because every situation is different, there can be no guarantees. In other words, an organization guaranteeing it can settle your debts for pennies on the dollar is flat out lying.
These are but four of the traits of bad operators. The Federal Trade Commission has written extensively on this topic and provides very useful information for how to find honest debt settlement at Consumer.FTC.Gov. You’ll do well to give it a look before you sign up with a firm.
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