Editor's choice: National Debt Relief
- No cancellation fees
- Low minimum to enroll
- No upfront fees
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Debt relief encompasses a wide a range of services, from helping you budget to negotiating with your creditors on your behalf. But watch out for companies that guarantee results or won’t disclose the cost up front.
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.
You might want to consider signing up for debt relief if you answer “yes” to the following questions:
But debt relief isn’t the right choice for everyone. If you could pay your debts off within five years and are confident in your ability to negotiate with your creditors, you may want to skip the fees debt relief companies charge. Instead, it may be worth doing it yourself — provided you are able to stick to a strict budget and repayment plan.
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. And if the lawsuit is successful, a debt collection agency may be able to garnish your wages for the amount owed — which could throw a wrench in your debt relief process.
Carefully consider the potential downsides to debt relief before signing up for a program.
Start your search for the company that best fits your financial need by comparing costs and requirements.
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 they aren’t always transparent about these costs or drawbacks that can negatively affect your credit score. 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:
There are five types of debt relief you can utilize to start paying off your debt.
Consider the following factors when comparing debt relief companies:
Debt relief isn’t a sure thing and each service serves a different purpose, but some people can benefit from working with a professional debt relief service.
Unless you’re just looking to sign up for a few budgeting workshops, the services offered by debt relief companies can land you in a worse situation than you started. Potential risks to consider depend on what type of debt relief option you sign up for.
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.
Some debt relief companies are scams, but not all of them. The federal government has made an effort to crack down on scammers since 2010. 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.
It should set off alarm bells if you a see a company committing any of these offenses:
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.
Most states require debt relief companies to get a license, file a bond with the state or both. Many also have rules restricting what types of services debt relief companies can offer and capping fees. Because of this, some debt relief companies may not be available in your state.
The states a company operates in can change along with the laws — reach out to make sure it’s currently operating in your state before signing up.
Handling past-due medical bills isn’t quite the same as unsecured loans or credit card debt. While it works a lot like unsecured debt, there are additional steps you can take.
The first, most important step, is talking with your provider. They may be able to set up a payment plan, sometimes without interest, that can keep your monthly costs low while working toward eventual payoff. And since you’re making regular, small payments, your debt won’t be reported to collections. In addition, you can also negotiate the bill or request a hardship plan.
If your debt has already been sold to collections, it may be worth reaching out to a nonprofit for help. You can also consider hiring a medical bill advocate, but this works similarly to debt negotiation — which could mean your credit score suffer. However, you should exhaust all other avenues of paying your medical bills before turning to debt settlement or bankruptcy.
Think debt relief might be right for you? Follow these steps to get started:
Now it’s up to you to complete your program. Keep an eye on your balances and stay in touch with your point of contact. Be sure to reach out if you have any questions or are unsure about how something works.
It takes self control and persistence to successfully complete a debt relief program. Here are a few tips that may be able to help:
You can handle your debt on your own with determination and a manageable budget.
Debt relief encompasses a wide scope of services, from debt negotiations with your creditors to debt management tools. Avoid signing up with a company that doesn’t meet federal requirements or otherwise rubs you the wrong way. And make sure you’ve exhausted other options like debt consolidation loans before taking any risky steps.
If you’ve decided on settlement, consider these top debt relief companies when you’re ready to get started.
There are no government debt relief programs — but there are other ways Uncle Sam can help.
Save up to 25% after fees with this accredited debt relief company.
Enroll as little as $8,000 with this debt settlement company.
This debt relief connection service helps you sort through your options — but has had questionable partners.
American Debt Relief can save customers around 30% of the debt they enroll. But there are a few red flags.
Debt settlement for payday loans and more — with almost no information available before you sign up.
A debt relief loan might be available if you have bad credit or high debts. But it also might not be your best choice.
A debt settlement company with overwhelming positive customer reviews — but isn’t the most transparent about costs.
Get matched with firms that specialize in IRS relief programs.
Get matched with a legit company that can help with your tax or credit card debt.
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