Editor's choice: National Debt Relief

- No cancellation fees
- Low minimum to enroll
- No upfront fees
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Editor's choice: National Debt Relief
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Before you sign up with a debt relief company
Debt relief companies typically charge a percentage of a customer’s debt or a monthly program fee for their services. And not all companies are transparent about these costs or drawbacks that can negatively affect your credit score. Depending on the company you work with, you might pay other fees for third-party settlement services or setting up new accounts, which can leave you in a worse situation than when you signed up.
Consider alternatives before signing up with a debt relief company:
Debt relief programs like debt settlement have a low completion rate — but for many, the benefit of paying less outweighs the risks. However, be prepared to spend three to five years working with a debt relief company to see results.
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Debt relief encompasses a wide scope of services, from negotiations with your creditors to debt management tools. Some debt relief companies help you manage your current debt and budget repayments in an affordable way. Others, like debt settlement companies, negotiate with your creditors to reduce the amount you owe.
In most cases, debt relief is legit. But you should avoid signing up with a company that doesn’t meet federal requirements or doesn’t provide much information on its website.
Credit counseling and debt management will have little to no impact on your credit score — but debt settlement or negotiation will. If your company tells you to stop paying your creditors, you may face a lower credit score, more collection calls and a lawsuit once your debt is sold to collections.
If a lawsuit is successful, a debt collection agency may be able to garnish your wages for the amount owed, which could throw a wrench in the debt relief process. Carefully consider the potential downsides to debt relief before signing up for a program.
Debt relief doesn’t necessarily mean debt settlement. There are other ways to tackle your debt — although you’ll likely have to pay a fee for any option you find.
Almost every major lender — and many smaller lenders — are offering financial assistance for borrowers affected by COVID-19. The most typical form of relief is deferment or forbearance for your loans. While this will pause payments for one to three months, it may lead to you paying more in interest over the life of your loan. However, it can provide a small cushion to help prevent default if your finances have taken a turn for the worse during the pandemic.
Some business owners may also be able to qualify for business debt relief, including six months of payment relief through the SBA.
Debt consolidation can be a form of debt relief, but in general, debt relief refers to debt settlement or debt management. Debt consolidation is typically only available to people with good to excellent credit because it involves borrowing a new loan to pay off all your debts at once. This consolidates your payments, and could potentially lower them — if you’re able to score a lower average interest rate.
Debt settlement involves working with a company that will negotiate with your creditors on your behalf. The goal is to pay off your debt for less than you owe. However, most debt settlement companies charge a high fee and require you to stop paying your creditors, which could put you at risk of a lawsuit.
Consider the following factors when comparing debt relief companies:
While debt settlement can be helpful for a lot of people, know what you’ll have to pay before you get started.
There is a tax loophole, however: You might be exempt if your tax liabilities are greater than your assets at the time of the settlement. Talk with a tax specialist before enrolling in a debt settlement program to learn how this exemption might affect you.
While most debt relief companies are legit, there are scams out there. It’s easier to find a legit credit counseling agency than any other type of debt relief company — they’re mostly nonprofit and the Department of Justice has already done most of the work for you by compiling a government-approved list of credit counselors.
It should set off alarm bells if you a see a company committing any of these offenses:
It also pays to be aware of your state laws. Ensure that any debt relief company or attorney you’re working with holds the appropriate licenses and follows state regulations.
The most recent government crackdown has focused on student loan debt relief scams — one reason why most legit debt relief companies won’t touch student loans.
Watch out for any offers that try to get you to sign up for a new program fast, customer service reps that ask for your login information and anyone who claims to be a representative from the Department of Education. And check out our guide to avoiding student loan debt relief scams for more tips on what to look out for.
You can handle your debt on your own with determination and a manageable budget.
If you’ve decided on settlement, consider these top debt relief companies when you’re ready to get started.
No, but you’ll find government-approved credit counseling agencies. Avoid any debt relief companies advertising a “new” government debt relief program — it’s a common scam tactic designed to steal your money.
No, foundations and government programs don’t offer grants to individuals.
It depends on the type of debt relief you’re participating in. Talking with a credit counseling agency shouldn’t affect your ability to use existing credit cards. But a debt settlement or debt management program might require you to cancel your credit cards or could result in your credit card companies canceling your cards.
You might be able to apply for additional cards after you’ve finished your debt relief program, but you won’t be able to use your old ones. Look into secured credit cards designed to help you rebuild your credit score.
Yes. You can work with the IRS to come up with a payment plan, reduce the amount of debt you owe or even pause collections on your debt. This service is done directly through the IRS, rather than an outside company.
Alternatively, you can take out a personal loan to pay off your tax debt if you just need to break it up into more manageable installments.
If your mortgage is canceled, you might not have to pay income taxes on up to $2 million of that canceled debt, according to this 2007 law. However, not everyone can qualify. Contact a tax specialist to make sure you meet all criteria.
Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 1,000 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
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