What Can Consumers Expect from Debt Relief Companies?

One of the reasons it’s so easy to amass debt is because it can be a very solitary experience. It’s tough to look debt square in the eye, and even more intimidating to talk about it or reach out for help. Despite the fact that Americans carry upwards of $905 billion in credit card debt—or a household average around $16,000—it’s still easy to internalize. This can lead to mounting debt and increasing pressure to pretend like everything is fine, even as your financial situation gets more urgent.

While it may initially be uncomfortable to ask for help, it often ends up being an empowering experience. Why? Because from that day onward you have a plan—and hopefully a partner to make it happen. For example, debt relief companies offer structured programs for consumers determined to pay off outstanding credit card balances and debt.

What can consumers expect from debt relief companies? First of all, the success of your experience hinges on choosing a reputable program with a proven track record. Consider it a red flag when organizations ask for fees up front—an illegal practice that signals they’re more concerned with profits than results. In fact, your first conversation with a debt relief company should be just that: an honest conversation.

Step One: Evaluation

It helps to get organized before reaching out. You should have a good grasp on how much and what kind of debts you have. Transparency is key to finding a workable program for your needs. Let’s say you’re struggling to even keep up with the minimum payments on your credit cards. Before going so far as to declare bankruptcy, you can use a debt evaluation to see if any other strategies match up with your needs—debt settlement, for example.

An honest evaluation is the only way you can choose the right program and understand your role in resolving debt. Before you sign on the dotted line, compare your options and make some phone calls.

Step Two: Monthly Deposits

If debt settlement turns out to be a viable option and you choose to enroll in a program, you will then be responsible for making monthly payments into a dedicated FDIC-insured account. This account’s purpose is to hold the funds you will eventually use to pay your creditors. At this point, paying off your debts may seem like an insurmountable obstacle. After all, if you could have come up with thousands of dollars before, you would have. But that’s where the next step comes into play.

Step Three: Negotiation

The biggest potential advantage of pursuing debt settlement is the fact that the goal is to reduce your principal sum. In other words, you can potentially pay back your credit card debt for pennies on the dollar. Instead of facing $30,000 in debt, you may be able to pay back $15,000, give or take. It all comes down to the negotiation phase, in which a representative will reach out to creditors on your behalf and try to reach a settlement based on the amount you’ve amassed in your account.

Creditors are often willing to negotiate because it’s worth their while to obtain some payment from you rather than risk you are filing for bankruptcy and defaulting. As The Balance points out, negotiating is a matter of trying to get creditors to accept a sum that’s affordable for you. Consumers can reach out to creditors and negotiate on their own but enrolling in a debt settlement program takes care of this step by outsourcing it to trained professionals.

Step Four: Authorize

If all goes well, you’ll reach a settlement and authorize it.

The primary thing consumers can expect from debt relief companies is guidance and communication as they navigate the choppy waters of debt repayment.