5 Qualities You Should Look for in a Debt Relief Company

As long as you are careful about your choice of company, getting debt relief can be life-changing. We all know there is nothing worse than the feeling of falling into the trap of owing more than we’re bringing in. Like a snowball rolling downhill, it can feel like there is no light at the end of the tunnel. With a bit of discipline, however, and the help of a reputable firm, you can right the ship once again. Need some guidance in this arena? Read on for five qualities you should look for in a debt relief company.

1. A Debt Consolidation Firm That Doesn’t Promise Too Much

Debt consolidation is one form of debt relief, and a popular one at that, as it combines all your debt into one loan for easier repayment. However, if you’re behind on payments and have bad credit and a firm still offers you this option, run in the other direction. This is a sure sign of a firm that’s fishy. They’re most likely depending on desperate people overwhelmed by the burden of their debt.

You need to understand how debt consolidation works in order to evaluate whether it’s a good decision for you and what firms are reputable enough to go with. As this Investopedia.com article explains:

“Debt consolidation means taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones. In effect, multiple debts are combined into a single, larger piece of debt, usually with more favorable payoff terms: a lower interest rate, lower monthly payment or both.”

Although it isn’t the only form of debt consolidation, the way it is often done is that all the credit card debt is rolled onto a new card that has a much lower interest rate and, thus, repayment will be made easier. Another benefit is if you get a consolidation loan that is secured with an asset, you may qualify for a tax break. It’s ideal for those who have over $10,000 in debt.

If you have decades of stacks of papers with your money records like tax returns, bank statements, and other information, consider investing in a scanner from companies like Epson. It’ll be easier if you can access all of your financial information in one place online.

2. A Firm That Doesn’t Charge Up-Front Fees

FTC rules dictate that settlement firms are not allowed to charge up-front fees, and your first fee cannot be charged until a debt is settled. If the firm you’re looking at claims to need this up front, it’s a no-go. Also, as this Credit.com article notes, “If you do not get full written disclosure listing your expected fees, consider that a red flag and seek another settlement firm to help you with your debt.”

3. A Firm That Offers to Keep You Updated

If a firm says that it’s all handled and passes you off in a lackadaisical fashion, this a bad sign. Remember, debt settlement companies do not make monthly payments for you, so it’s still your responsibility to handle those. Any company worth its salt will let you know this and offer to keep you abreast of any of the renegotiations they are handling on your part.

4. A Firm That Doesn’t Discourage You From All Your Options

A legitimate firm will help you explore all your options, even if that means looking into an outside debt management plan or consulting a bankruptcy attorney. If it’s their way or the highway, that’s another red flag.

5. A Firm That’s in Good Standing

Check with the National Foundation of Credit Counseling and The Association of Independent Consumer Credit Counseling Agencies, as any reputable firm will be registered with agencies like these. Of course, don’t forget to see what kind of rating the firm has with the Better Business Bureau as well. This will also help you to see if the company has any lawsuits against them. A company should always have positive online feedback; such as these Community Tax reviews.

Choose the Right Debt Relief Company for You

There are plenty of debt relief agencies out there but you want to do your due diligence in choosing yours wisely. In fact, some creditors won’t even renegotiate interest rates and such if the firm is a disreputable one. Do your research, look for these qualities in your target firm, and you’ll be on the road to good financial standing once again.

And don’t forget, more than anything, you should work to understand your debt so you don’t get trapped in a debt cycle. Save money, keep your expenses as low as you can, and live within your means.