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Do Debt Relief Programs Really Work?

Debt relief program, well that sounds great! That’s exactly what you need at the moment. At first glance it seems very simple: you could contact the debt settlement bank, they will negotiate with creditors and the problem is solved. But is it really that simple and harmless? In the text below, you will see pros and cons of this program and based on that you’ll succeed to come to the answer to the question: do relief programs really work?

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In the beginning, how do debt relief companies work?

Debt relief companies (alternative to debt settlement comp) are corporations that promise to help clients whose debt is overwhelmed. How does it actually work? Several answers to this question are offered at creditassociates.com. These companies are for-profit companies/banks. You pay them to negotiate on your behalf with the lenders to whom you owe money. This whole procedure has only one goal: to convince creditors to reduce the full amount you owe, and in return you will pay all the debt (settling). How much and in what way your primary debt will be reduced depends on the debt itself and your financial ability. Usually, only the amount of the principal you owe decreases, but the details depend on the bank where you have the debt. For a client to be protected, the law requires that fees for this work be charged only when the client agrees to the proposed compromise.

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Pros

The good sides of this program are simple. First and foremost, you will pay a smaller amount than you owe. Since it is less money, your monthly payments will be less, so you will be able to allocate the rest of the money to some other priorities. Depending on the bank, the interest rate on your cards can be reduced or the repayment period can be extended, depending on the specific situation. In addition to professional negotiations, creditors are also satisfied, because they received the earned salary, and the clients are satisfied as well because they will repay the debt much easier, and often much faster.

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Cons

This process can damage your creditworthiness. Debt settlement companies will often advise you to suspend payment in the negotiation process. However, regardless of the situation, any missed payments will be recorded in your credit report. This situation negatively affects your credit score and can jeopardize your creditworthiness. If negotiations drag on, there is a fear that creditors will sue you to collect the debt.

No one can guarantee that the negotiations will be successful for you. If that comes true, you will not pay compensation to the company but you have lost time, received penalties for non-payment of debt that can increase your debt.

In the end, if the negotiations are still positive for you, the fees are unexpectedly high. Although the conditions are described to you at the very beginning, there are always hidden and unexpected payments that you didn’t count on. Usually, these companies are paid 18-25% of the total debt, which, you will admit, is not a small amount.

To summarize: debt relief programs do the job, but under certain risks. Definitely, this program is not for everyone. It depends on your goals, financial situation and vision you have. If credit points are more important to you, then you should definitely avoid both programs. However, if you decide to take this step, study all the possibilities and take the time to look for a debt relief company that has high references.

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Written by Michaela Ball