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If you want to choose the right debt relief company, it can help to ask the right questions.
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It can be tough to find a path out of debt in any economic climate, but for many borrowers, things are especially difficult right now. Part of the issue is that credit card balances are currently hitting record highs, with the average American household carrying nearly $8,000 in high-rate credit card debt. Meanwhile, inflation has made it harder than ever to find room in the budget for monthly payments, leaving millions of people feeling like they can only afford the minimum payments, which keep the account current but barely touch the principal.
So, it’s no wonder that debt relief companies are experiencing a surge in demand as people search for ways out. It’s important to understand, though, that debt relief companies aren’t one-size-fits-all, and some may be more reputable than others. While the right debt relief company can genuinely help you get your finances back on track, the wrong one may do more harm than good.
That means before you hand over your financial future to any debt relief company, you need to do your homework. Asking a few smart questions up front is essential to protect yourself and find real relief.
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5 top questions to ask before hiring a debt relief company
Before you decide which debt relief company to hire, be sure to ask the following questions:
What exactly are your fees, and when do you collect them?
This should be your very first question, and the answer will tell you a lot about whether you’re dealing with a legitimate company. Under federal law, debt relief companies cannot charge you any settlement fees until they’ve successfully settled or reduced at least one of your debts. If a company asks for money up front or wants you to pay them a fee before they’ve done any work, that’s a major red flag.
Legitimate companies typically set their fees as a percentage of the amount of debt you enroll in their program. This fee structure aligns their interests with yours, as they only get paid when they deliver results. Be wary of companies that are vague about their fees or refuse to put their fee structure in writing. Get everything in writing before you sign anything, and make sure you understand exactly what you’ll pay and when.
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Are you properly licensed and accredited, and what’s your track record?
Not all debt relief companies are created equal, and some states require specific licenses to operate in this industry. Ask to see proof of any required licenses, and check with the attorney general’s office in your state to verify the company’s status. Look for accreditation from reputable organizations as well, as that can signal that you’re working with a debt relief company that prides itself on doing things the right way.
Just as important as credentials is the company’s track record. So, ask questions about specific statistics. What percentage of their clients successfully complete the programs they offer? What’s the average amount of debt reduction they achieve? How long does the typical program take? A reputable company should be able to provide this information readily. And, be sure to also check their Better Business Bureau rating and read recent customer reviews to get a sense of their reputation.
What specific strategy will you use for my situation?
Debt relief comes in numerous forms, and a good company should take time to understand your unique financial situation before recommending a strategy. Some companies focus on debt settlement, meaning that they negotiate with creditors to try and settle for less than what you owe, while others might recommend debt management plans, consolidation strategies or other approaches.
Be wary of any company that immediately pushes one solution without thoroughly reviewing your finances. They should ask detailed questions about your income, expenses, types of debt and financial goals before coming up with a plan to help address your debt. A legitimate company will also explain the pros and cons of different approaches and help you understand which option makes the most sense for your specific circumstances.
How long will this process take, and what should I expect along the way?
Debt relief is rarely a quick fix, despite what some advertisements might suggest. Most legitimate programs take anywhere from two to four years to complete, depending on how much debt you have and how much you can afford to set aside each month. So, ask clear questions about how long the process could take, and be wary of companies that promise unrealistically fast results.
A good company should provide you with a realistic timeline and explain what will happen at each stage of the process. They should also be upfront about potential consequences, such as the impact on your credit score or the possibility that some creditors might not agree to settle. Make sure you also understand what’s expected of you during the process and what kind of communication you can expect from the company.
What are the risks and potential consequences I should know about?
This question separates the honest debt relief companies from the ones just trying to make a quick sale. Debt relief programs come with real risks and consequences that you need to understand before committing. Your credit score will likely take a hit, at least temporarily, and some creditors might refuse to negotiate and could pursue legal action. There might also be tax implications if forgiven debt is considered taxable income.
A reputable company will be upfront about these risks and help you weigh them against the potential benefits. They should also explain what steps they’ll take to minimize negative consequences and what kind of support they’ll provide if problems arise. If a company glosses over the risks or makes it sound like there are no downsides, consider that a warning sign.
The bottom line
Hiring a debt relief company is a big decision — one that shouldn’t be taken lightly. While the right company can help you reduce or manage your debt more effectively, the wrong one can cost you time, money and credit damage you didn’t anticipate. By asking these essential questions, though, you’ll be in a much better position to spot trustworthy professionals, avoid scams and take meaningful steps toward financial freedom.
Angelica Leicht
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