When you are in a financial hole, you want to avoid declaring bankruptcy as best as possible. Many consumers start by consolidating their debt and canceling credit cards, while others sell property and equity to offset their pressing debts. When that does not work, the last option for most becomes negotiating for debt settlement.
You can consider doing this independently, but the bureaucracy involved in this process might be hard for you to navigate. Some are successful and get their settlement plan going. However, if you cannot hack it, you can always consider having a debt settlement company handle the negotiations on your behalf.
The process allows them to talk to your creditors and convince them to offset part of the debt owed. Since this is the last resort option, you must work with the best in the market. If you are green on how to pick one, that becomes a daunting task. Below is a guide on choosing a debt settlement company to ease your burden.
Table of Contents
1) Do Your Research
So many firms claim to offer this service, but that is all they claim. Many lack a track record on the number of clients they’ve helped resolve such matters. Others gamble with their enlisting clients and woe unto you if their trial and error session does not favor you. Others are known to lose these deals each time.
To start with, firms that perform exemplary well in this field are known to specialize in specific debt management options. Some take on credit card debts, mortgages, student loans, tax-related debts, personal loans, legal fees, and medical bills. You should only consider one specializing in the type of debt you plan to settle. When you have no idea where to source information on such companies and the debts they help settle, Dallas Morning News is an appropriate source. It conducts an in-depth review and unbiased reporting on such companies helping you make an informed decision.
2) Consider Costs
Before debt settlement negotiations, the company requires you to raise significant funds first. These funds are attractive to creditors, as they would rather work with funds in your hands than future promises that might never be fulfilled. Raising this amount of money is a nightmare for most debt owners as many go down this route when all avenues to raise funds to pay debts fail. When the negotiations fail, the amount can settle a significant amount of the debt. However, when these funds were raised from a loan, you are in trouble as premiums and interest accrued should be paid too.
You should also factor in the fee charged by the debt settlement company. Some charge a fixed rate for debts within specific ranges. Others take up a percentage of the total amount they can help you avoid. The rogue lot is known to charge upfront fees and have hidden costs. When you are afraid of getting slapped with unknown terms and costs, consider seeking legal advice, as they might help you dodge a bullet.
That comes at a fee, too, and you should consider the value of money it might save you versus the fee paid for the service. Exorbitant fees leave you in a financial pit for months before you can resolve your financial crisis. Others lead you back to the same hole you desperately want to crawl from.
3) Consider the Consequences
Each firm has its approach to how they help you settle your debts. Some have negotiating skills that will see your debts decrease by a huge margin. However, that also comes with its consequences. Some affect your credit score and loan availability as the financial institution drops you once you clear the agreed amount. Since institutions share data and loan repayment histories, many would not be willing to take you up as they consider you a liability.
However, some consequences are worth the risk. You get to save a huge chunk of funds you would have paid in the future. The funds can be diverted towards a development investment, which helps you earn more in the future. When negotiations fail, you can expect to pay the total funds that probably include penalties due to delays when looking for a firm to help you settle.
4) Digital Presence
In today’s world, you do not have to drive or even fly for miles to walk into an office for services to be rendered. Firms nowadays have an online presence that allows them to connect with their clients across the globe. Look for a firm that helps resolve your debts without always having to show up.
The firms should keep you posted on the progress. They should share copies of your contract to help you settle your debts, advice, contracts, and receipts. This helps you follow the process and keep copies as proof when disputes arise.