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Looking for a debt settlement company can be a daunting process. Not only are you dealing with the stress that comes tied to overwhelming debt but also with the fear of whether you’re making the right choice. Thankfully, there are a few simple steps you can take to help you choose the best debt settlement company for your situation.
Consider minimum debt requirements
Debt settlement companies have a minimum debt requirement to be able to work with you. Most ask you to have at least $10,000 worth of debt to sign up for their services. However, some, like Freedom Debt Relief, require a lower minimum outstanding balance of $7,500.
Besides that, you’ll typically be required the following:
- Be willing to settle anywhere between 10 and 50 percent of your debt.
- Be unable to make monthly payments.
- Be behind on payments.
Additionally, these companies usually only work with unsecured debt, such as personal loan debt, credit card debt or medical debt. So, if you’re having issues with secured debt, like an auto loan or a mortgage, you’ll have to look for help elsewhere.
Bankrate tip
Avoid working with a company that does not accommodate all — or at least the majority — of your debt.
Inquire about time frames
Unfortunately, settling your debt is not a quick process. When entering this option, it is important to prepare for the long haul as you don’t have much control over the time it takes. In some cases, the entire process of settling your debt can take up to four years.
Comparing time frames from different companies can help you make the best choice for your needs. Accredited Debt Relief, for example, claims it can get clients out of debt in as soon as 12 months, ideal for someone in a time crunch. Whereas Pacific Debt Relief has a longer minimum timeline of 24 months.
Bankrate tip
The most trusted options have long standing relationships with major financial institutions and can expedite the settlement process.
Compare fees
If you are already in a precarious financial situation any more incurred costs can create additional problems. With this in mind, it is important to pay close attention to any potential fees charged by the companies.
When working with a debt settlement company you can expect to pay standard fees which generally fall between 15 and 25 percent of your enrolled debt. So if you were settling $10,000 you could pay anywhere from $1,500 in fees. On top of closing fees, there will likely be account maintenance fees. But keep in mind that no major fees should be charged upfront.
Bankrate tip
A well-regarded and legitimate debt settlement company won’t charge unreasonable fees but you should prepare to be charged a percentage of the debt you enroll.
Look for guarantees
Those looking for an added layer of protection should pay attention to companies that offer guarantees. This means that the company will not enforce fees for more than the amount that you enrolled with if they can’t settle it.
Some companies also promise no additional fees to you on what isn’t settled.
Bankrate tip
When looking at company guarantees, don’t get wrapped up in flashy language — ensure that the company displays full transparency for its claims.
Check complaints
Company websites tend to put the best foot forward when it comes to their offerings. But you can’t always trust what you read, especially when it comes to debt settlement. With this in mind, it is important to check the credibility of companies before signing off to work with them.
When researching, check out what previous customers have to say about the companies on trusted websites, such as the Consumer Financial Protection Bureau’s consumer complaint database. The Better Business Bureau is another page you can trust to find common complaints on companies you are considering, as well as a range of consumer reviews.
Bankrate tip
If you are unsure of the reliability of a company you can always contact your state’s attorney general and see if there is any current legal action against the firm.
Additional features
While debt settlement companies present you with the same outcome, the road to getting it is not consistent. Consider the following special features when choosing between options.
- Team experience. Working with a company that has untrained consultants can create more issues when it comes to negotiation. Request background information on any debt consultant you are matched with.
- Customer service. A company with poor service or the inability to answer your questions is a red flag. Look out for options that have clear business hours and representatives that are ready to help.
- Length of time in business. A longer track record reveals a strong history of helping clients with their debt settlement.
- Accreditation. There are a few associations that increase reliability in the space. Primarily, The American Fair Credit Council (AFCC), as companies can only join if they are in strict compliance with the Federal Trade Commission. Membership in The International Association of Professional Debt Arbitrators is also a green flag.
Bankrate tip
Use special features to tip the scale when choosing between two similar debt settlement companies. Strong customer support, for example, can make your life dramatically easier.
The bottom line
Debt settlement companies can bring some much-needed relief if you’re overwhelmed with debt and running out of options. Make sure to evaluate what each of them has to offer from minimum debt amounts to service guarantees and fees, to ensure you’re dealing with a reliable company that can actually help with your situation.
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