Is Debt Settlement a Legitimate Way to Deal with Debt?
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Many people struggling with debt are desperate for a solution. But it’s important to be wary of any company that promises the world—without any downsides. You’ve probably heard the old adage before: “If something sounds too good to be true, it probably is.”
Since no solution is perfect, it’s important to weigh both the pros and cons thoroughly. Let’s take a look at one solution—debt settlement—to learn more about this legitimate, proven way to deal with debt.
What are the pros of debt settlement?
Decreases the overall amount you owe. Debt settlement reduces your debt through a process of negotiating with your creditors to accept a lower amount than you owe. Freedom Debt Relief (FDR) has been in the debt settlement business since 2002, so we have a great deal of experience negotiating with creditors to significantly reduce what our clients owe.
Frees up cash each month. In a debt settlement program, instead of making payments to your creditors, you make a monthly deposit into an account you control. Those deposits will be used to pay for your reduced settlements. The deposit amount is customized to fit your budget, and is often much lower than your minimum payments to creditors. That means you could see an immediate increase in your available cash each month.
Puts debt in your past sooner. Debt settlement could considerably reduce the amount of time it takes to pay back your debt compared to making minimum payments. In the FDR program, you can eliminate the debts you enroll in just 24-48 months.*
Costs less than a loan. With a consolidation loan, you may be able to lower your interest rate, but you still need to pay back the full balance of your debt which means it will cost more than a debt settlement program in the long run. A loan also charges interest on top of what you owe, so a monthly deposit made in a debt settlement program will likely be less than a monthly loan payment.
What are the cons of debt settlement?
Costs a fee. FDR collects a fee after it negotiates each debt settlement. On average, FDR charges a fee of 23% but it varies depending on the amount of debt you enroll and which state you live in. These fees are set and will never increase. We do not charge any fees in advance of getting a debt negotiated for you, and there’s no charge to enroll in the program. In other words, we don’t collect any fees until you see results. If a debt settlement company claims their services are free and no fees are required, beware.
Temporarily impacts your credit score. Debt settlement negatively impacts your credit in the short term because you choose not to make payments to your creditors in order for them to be open to negotiations. However, that impact is temporary. According to a study of FDR clients, after six months in the program, clients’ credit scores begin to recover. The study also showed that when clients graduated, their credit scores had likely recovered to nearly the same level they were at the start of the program.
Could cause creditors to try other tactics. When creditors aren’t successful in getting you to pay right away, they may use other strategies to collect on the debt: they may send your account to a collection agency, a debt buyer, or a debt collection law firm. In the FDR program, if this happens with one of your creditors, all you need to do is notify us. Our program includes access to a network of attorneys that specialize in resolving debt litigation just in case legal issues arise.
So is debt settlement legitimate?
Yes, debt settlement is legitimate, but not every debt settlement company is. While the process of debt settlement is a legitimate way to deal with your debt, it’s important to note that not every company that offers this service is reputable.
One of the biggest red flags is when a company doesn’t explain the downsides of the process. Transparency is incredibly important when you’re trusting a company with your financial situation. No one wants to be blindsided with something they never saw coming.
If a company isn’t willing to answer your tough questions or only gives you vague answers, you may want to think twice about committing to their program. Debt settlement is a process that can take a few years to complete, so you want to work with a company that will answer any questions that come up along the way.
Another major red flag is if the company charges fees before a settlement has been negotiated—this is prohibited under the Federal Trade Commission’s (FTC) Telemarketing Sales Rule.
Why have 800,000+ people chosen Freedom Debt Relief?
If you’re researching Freedom Debt Relief as an option for debt settlement, here are a few facts about us:
We are the largest debt settlement company in the country.
Since we started in 2002, we’ve resolved over $10 billion in debt for over 800,000 clients.
We were involved in establishing FTC rules in 2010 that ban abusive debt settlement practices.
We’ve helped set ethical standards for the debt negotiation industry as a founding member of the American Fair Credit Council.
We are rated 4.6 stars by Trustpilot, one of the largest independent consumer review programs.
Since day one, our mission has been to help everyday Americans move forward toward a better financial future. We’re committed to doing that in an ethical and transparent way.
If you have any concerns about our company or about the debt settlement process, you deserve to have those concerns addressed. We can answer your questions and help you make an informed decision about your debt options. Give one of our Certified Debt Consultants a call at 800-910-0065 for a 10-minute assessment to see if debt settlement is the right solution for you.