How to Choose a Debt Settlement Company

Choosing an ethical debt settlement company is absolutely essential for those who wish to eliminate excessive credit card debt, medical bills and other miscellaneous unsecured debts. Whilst there are cowboys in every industry, there are a number of highly competent providers of debt solutions that can turn around your financial circumstances completely.

What is a Debt Settlement Program?

A debt settlement company, also known as an intermediary, will negotiate with creditors to help you reduce excessive credit card debt. They are able to write-off up to 50% of unsecured debt and arrange a reduced, affordable repayment over a 12 to 36 month period. At the conclusion of this term, any remaining debt is written-off so you will be completely debt-free.

Better Business Bureau

Check with the Better Business Bureau (BBB) to identify debt settlement companies with the best ratings. This is an invaluable way to identify unethical and unscrupulous providers. Make sure that the check is performed on the company providing the debt solution and not the affiliate that refers you. This can easily be checked prior to signing-up.

Avoid Any Debt Settlement Company That Front-Loads Fees

The majority of debt settlement companies charge about 15% for their services, but not all of them seek an up-front payment. A front-loaded program means that very little debt is cleared in the first 12 months so creditors are far more likely to initiate legal proceeding against you. Most horror stories come from these providers; avoid them and they will have no alternative but to change how they operate.

Try to identify a service where fees are not front-loaded. Find an intermediary that takes their 15% from each monthly payment instead as this will ensure that more of your money goes directly to creditors. As long as a creditor is receiving payment, they are less likely to send collection agencies after you. It also means that your debt won't increase if you subsequently discover that this debt solution is not for you.

Timeframe of Debt Repayment

The timeframe of a debt settlement program is traditionally between 12 and 36 months. It is possible to extend the term, although this is not recommended as it increases the likelihood of legal action. If you can keep the repayment term to approximately 24 months, you have a great chance of becoming completely debt-free. However, there is no point in trying to clear debt at a rate that is not affordable as you are destined to failure.

Every debt settlement company is different so it is essential that you do your research before proceeding. Avoid front-loaded plans and keep the repayment term as short as possible, but never compromise your ability to pay. Remember that there are other debt solutions available to you.

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.