Many consumers know they want financial security, including a debt-free future—they just aren’t sure exactly what steps to take to get there. It can be challenging to know exactly how to get from where you are now to where you want to be, money-wise.
One thing is clear: Every dollar of debt you carry is standing between you and the future you envision. So, the first step is figuring out exactly how you plan to tackle your debt. In other words, it’s important to take time to research your options and understand what the best debt relief solution is for your unique situation.
As you’re conducting research, you’ll inevitably come across debt settlement as a potential option. Many consumers have found success enrolling in a debt settlement program. But this hinges on choosing a legitimate program with a track record demonstrating success in helping clients settle their debts for less than the original balances. Unfortunately, some opportunistic scammers try to take advantage of people seeking debt relief.
Making the right decision for your financial future depends on having the right information and knowing what differentiates scams vs. real services. Keep reading to learn more.
Spotting Scams: Debt Relief Red Flags
Debt settlement is supposed to work something like this: Consumers who enroll deposit money each month into a dedicated account they control. When this account reaches a certain threshold, negotiators from the debt relief program reach out to their creditors, attempting to reach a settlement that’s lower than the actual principal balance. If creditors agree, the money from the account goes toward paying the agreed-upon amount. Then that debt is zeroed out.
Some scammers attempt to prey upon people, promising to reduce or eliminate debt. In fact, the Federal Trade Commission recently shut down a phony debt relief operation in Florida. A group of scammers allegedly got people to pay hundreds or thousands of dollars per month “by falsely promising they would pay, settle or obtain dismissals of consumers’ debts and improve their credit.” Over time, consumers found the opposite occurred.
When you’re considering debt settlement, how can you protect yourself against scams? Be wary of the following red flags:
- Guaranteeing positive results (like completely resolving debts)
- Guaranteeing “too-good-to-be-true” results (like debt reduction of 70 to 80 percent)
- Promising speedy results
- Outlining pros without sharing the cons
- Promising to improve credit
- Failing to produce a track record of success
- Asking for payment up front without results
- Claims its program can stop calls from collectors
A good rule of thumb to keep in mind is that if something sounds easy, comfortable and miraculous, it’s likely a scam.
Choosing a Legitimate Debt Relief Company
Legitimate debt relief companies, on the other hand, will be up-front about the advantages and disadvantages of debt settlement. They will not make any far-out guarantees because each consumers’ case differs, so blanket promises are not applicable. They will also not ask you for payment until they’ve settled a debt.
Start by comparing industry leaders to get a feel for what a legitimate program is like. Freedom Debt Relief reviews reveal that this program has helped more than 500,000 enrollees in more than 15 years—resolving more than $9 billion in debt. While this is not necessarily a guarantee this program is perfect for you, it clears up the possibility that it’s an illegal scam.
Legitimate debt relief companies will take time to go over the specifics of your financial situation to see if you’re a good fit for their program. As the attorney general of Arkansas warns, any company that “tries to enroll you in a debt relief program without spending time reviewing your financial situation” is a sign of an unscrupulous entity.
The only way to make the right decision for your debt-free financial future is to research your options carefully so you can avoid scams along the way.