Debt settlement is typically used as a last resort for those who are struggling to get their debt under control. Due to this, there are lots of people out there who want to take advantage of people’s tough situation. Here are some questions to ask a debt settlement company to protect yourself against predatory behaviors.
Can You Operate In My State?
One of the oddities of living in a country comprised of 50 semi-autonomous states is the fact they’re all going to have slightly different laws. This is the case when it comes to deb settlement companies.
It’s important to determine if a debt settlement company can actually legally do business in your state before you put forth any effort, or give them any of your financial information.
How Many of My Lenders Do You Work With?
The debt settlement process works a bit differently than other kinds of debt relief. Essentially, you’re working with a company that will negotiate on your behalf in order to lessen the overall amount you owe in exchange for a lump sum payment. This can be a riskier strategy, as it typically involves not paying your creditors, and instead sending money to the debt relief company to be held to assist in negotiations.
While this can definitely work for individuals who are too deep in debt to be able to get out of it otherwise, there’s one huge snag that can foil this plan: if your lenders won’t work with the debt relief agency. In this case, you’ll have hurt your credit without having really gained anything. It’s essential to ask if a debt settlement company works with your specific creditors before agreeing to anything.
What Are All Your Fees?
By law, you shouldn’t have to pay for debt settlement until the company has actually settled at least one of your outstanding debts. Still, it’s important to ask how fees are calculated for a couple reasons.
For starters, the amount you pay should be based on the amount of debt settled, not the amount you owe. It only makes sense for you to be paying a company when they actually provide you a service. Debt settlement is no different than any other kind of business in this regard. You shouldn’t expect to pay for produce you don’t buy when you check out at the grocery store. Similarly, you shouldn’t pay for services that you don’t really receive when working with a debt settlement company.
One of the smartest things to do when determining whether to go with a debt settlement company is to dig into what other people are saying about them. Many positive or negative reviews can be indicative of the overall quality of the organization. Looking through Freedom Debt Relief reviews, you’ll see they’re one of the more qualified debt settlement companies out there.
How Will You Be Paying My Creditors?
It’s essential to understand how exactly a debt settlement company will be going about the process of paying your creditors. As already mentioned, it’s typical for you to send payments directly to the debt settlement company, which they will then use to negotiate a lump-sum payment.
While this can be damaging to your credit score in the near term, as you’re not paying your bills, it’s simply the way debt settlement works. Ideally, you’ll be able to rebuild your credit score over time once you’ve settled your debt. Be suspicious of any debt settlement company that says they’re going to settle in another way. Settlement doesn’t happen through monthly payments to your lenders, so something is probably amiss if this is how the process is presented to you.
How Are You Being Paid?
It’s not too intrusive to ask the company representative how they’re compensated. If they’re being paid on a commission, it often means the organization is more so trying to maximize their own sales rather than help people. Understanding how people you’re working with are paid based on your business relationship can help you make a more grounded decision.
Debt settlement can be a difficult process for many reasons. It’s only made harder when you end up with a debt settlement company that’s not really looking out for you. Asking these questions can help you avoid falling victim to a scam.
