Are you up to your neck in unsecured debt?
If yes, you might be looking for a way out to get rid of your unsecured debt like a credit card, payday loan, etc. at the earliest. Due to its easy availability and faster cash disbursement, payday loans are lucrative options for the people in need of urgent cash. But you have to pay a hefty price for this convenience as payday loans have incessantly high-interest rates.
In this situation, what if I tell you that you can get out of debt by paying off a much lower amount than what you owe?
Seems impossible? Well, it’s not. Once you hire a debt settlement company, the financial experts will analyze your financial situation. And based on that, they will chalk out an affordable monthly payment plan. You will have to deposit the money in an escrow account, created by the settlement company, until you have accumulated enough to offer a lump sum amount to your creditors.
The debt relief experts of the settlement company will try to negotiate with your creditors to reduce the total outstanding balance amount by offering the lump sum. A Center for Responsible Lending report has revealed that the average debts are settled at 48% of the outstanding balance amount.
So, if you are looking to settle your debts, you need to hire a genuine debt settlement company. Otherwise, you might end up getting trapped with more debts.
Here are some of the important factors that you need to consider while hiring a debt settlement company.
Does the company have IAPDA-Certified debt consultants?
Negotiating with creditors to settle your debts is not an easy task. Why would anyone agree to take less than the amount you owe? A good debt settlement company usually has a team of debt specialists, preferably with IAPDA Certification. Being IAPDA-Certified means they are well-trained in debt settlement and have met a minimum standard of excellence to earn the certification.
So, they will be able to negotiate with your creditors in a much professional way. And your debts might get settled in a much lower amount than you expected.
That’s why while hiring a debt settlement company, check whether or not the company has IAPDA-Certified debt consultants. If yes, I would advise you to talk to them about your debt problems instead of talking to any salesperson; because salespeople are usually more concerned with making a sale than helping you with your debts.
Do you need to pay upfront fees?
It’s quite obvious that when you are opting for professional services, you have to pay a charge for it. But a reputed debt settlement company won’t charge you any fees until they settle your debts.
According to a 2010 Federal Trade Commission (FTC) rule, no for-profit debt settlement companies are allowed to charge fees until they settle a customer’s unsecured debts.
So, you need to ask about the fees that you need to pay to the settlement company. If they mention paying any upfront fees for settlement, I would suggest you not to look forward to that company.
A reputable debt settlement company will charge you a fee only when the negotiation is successful. Usually, they charge about 10% to 25% of the debt amount you owed when you hired them.
If you have any questions about their fees, feel free to call their customer helpline. Usually, they have a team of customer service representatives who are always eager to help you with any questions about debt settlement, its related fees, etc. So, make sure to clear all your doubts before you hire a debt settlement company.
How is the feedback of the settlement company?
Before you hire a debt settlement company, you need to do thorough research about it. First, check with your state Attorney General and local consumer protection agency that whether or not there are any consumer complaints against the company. You can verify with the Attorney General that if the company has a valid license to run its business in your state.
Besides, you can ask your friends or colleagues who have opted for debt settlement. Try to know about their experience and get feedback from them about the settlement companies. Also, you can know what the customers are saying about the company by typing “complaints” after its name in any search engine.
However, complaints are normal because it’s quite impossible that everyone will be satisfied with their services. But the number of complaints should not exceed the number of good reviews.
So, a reputable debt settlement company may have a few negative reviews. But they won’t indulge in any unfair practices that are against FTC rules.
How long has the company been in the debt settlement business?
A company’s experience matters when it comes to debt settlement. If the company has been conducting business for a long time, it implies its success and confidence in settling debts.
The Consumer Financial Protection Bureau (CFPB) has sued many settlement companies that have failed to settle debts by an appropriate amount. New companies are likely not to have much experience in debt settlement. If you hire one of them, your debt might get settled in a very nominal amount.
That’s why if a debt settlement company doesn’t have the requisite experience, it might not be a wise option to hire that company.
Is the company a member of American Fair Credit Counseling (AFCC)?
AFCC is the “watchdog of the debt settlement industry”. It ensures a standard of practice and operational compliance for all its members to abide by the guidelines of the FTC. For example, AFCC members operate under a “No Advanced Fee Model”, meaning that they won’t charge any fee until a debt has been settled.
A debt settlement company can become a member of the AFCC only when they are in full compliance with the FTC rules and regulations.
So, before you hire a settlement company, check here whether or not it’s a member of the AFCC. If yes, you can expect a smooth settlement process to get rid of your debts.
So, the bottom line is, while hiring a debt settlement company you need to consider some factors that separate the reputable companies from the rest.
Remember, you are making an important decision by settling payday loan debt or any other unsecured debt. The reason being, you are going to spend a good amount of money to get rid of debt by trusting the settlement company.
So, I hope that the above-mentioned parameters will help you to find a legitimate debt settlement company and decide accordingly.
Author Bio: Phil Bradford is a financial content writer and an enthusiast. He has expert knowledge about personal finance issues. His passion for helping people who are stuck in financial problems has earned him recognition and honor in the industry. Besides writing, he loves to travel and read books.