Over the past several months, we have received request from many of our subscribers to get some information about the various debt relief programs that advertise on television and the internet. Since some of these programs can be scams and some are legitimate, it is important you take the appropriate steps to find the right program just for you. Here are some thoughts on choosing a program that may be right for you.
1) What solutions does the company provide? Different companies or non-profits are skilled a various debt relief/settlement programs. You need to consider the size of debt you are trying to negotiate down and what type of debt you are looking to reduce overall. Recognize that many of the credit card companies won’t even talk with you while you are still on the preverbal stationary bicycle still making minimum monthly payments. Some companies do debt consolidation, some debt negotiation/settlement, and some will deal with IRS debt as well. The more specialized the organization you choose, the better of a chance you have to accomplish your debt relief goal.
2) What is the cost for engagement of the debt relief company? This can be one of the hardest parts of being able to choose a company. Some companies ask for a fee right up front which are the ones I like the least and typically where you find your largest amount of scams. I recommend getting involved with a debt relief company that makes its money when you get your debt negotiated and settled. Various companies will work on a fee system, a percentage commission system, and some will ask you for a monthly fee which you need to be certain will end once you end the process. You should be 100% certain that you see a contract in writing before you engage in any of these companies so what they tell and what it is in writing are one and the same. Remember, that any percentage savings (i.e. – we will save you 80% on your debt) does not include the fees that you will pay to the debt relief company. Use a rule of thumb of a net 30% to 50% of savings when it is all said and done.
3) Dependability and scams – You should be sure to check the Better Business Bureau to see if the debt relief company you are considering using has a quality rating with no complaints. Sometimes you can also check the internet to see if the company has had any items posted on a local or national complaint board. You should ask if they are part of any local organizations such as a Chamber of Commerce. However, nothing can serve you better than asking for references of three customers you can talk to who have used the debt relief company and actually saved money.
4) Is this a scam? While scams can sometimes be hard to detect, just be sure to get everything in writing and don’t pay any up front fees. Do not give any of these organizations a direct link to a credit card or bank account, and make sure if they ask for an ongoing fixed monthly fee that the contract stipulates how the agreement ends. Scammers are very skilled at making a lot of promises, and work very well at getting around contracts.
5) What about my credit score? If a company negotiates on your behalf for debt relief, you will want to make sure they also work with the debt company to give you a satisfactory rating for paying off the debt. While the debt relief may save you money, it could end up hurting your credit score if the items are reported correctly.
Whatever route you go down, remember that you are the CEO of your company. A good CEO gets several options when presented with a difficult business decision and weighs the pros and cons of the entire situation. Even if you feel like the debt could potentially make you bankrupt, you need to think about what will get your company (your personal finances) back on track to achieve your financial goals.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
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oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.
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