Debt Relief Companies: How to Avoid Scams

Consumer debt is at its all-time high, and with it, so is the rise in the number of individuals looking for debt help from third party debt relief companies to manage their finances, negotiate with creditors, and eventually, solve their debt problems.

However, for every company offering legitimate credit assistance, several others run debt relief scams. Not only will they aggravate a difficult situation, they could also cause you to sink deeper into debt, something you can easily avoid at the outset. Below are tips that will teach you how to avoid debt relief scams:

When considering debt help, remember that there is no such thing as a magic bullet.

If you have done your research and are aware of the steps required for getting out of debt, no debt relief scam can touch you. Everything that a debt-counseling agency can do, you can do yourself, even if you are hiring a legitimate group.

If the company tries to convince you that they know certain industry secrets that will wipe out your debt or have exclusive access to creditors to cut down your interest rates dramatically, they are actually promising more than they can deliver.  

There is no such thing as a secret process, an exclusive step, or procedure that can erase debt instantly or magically bring it down to a few hundred dollars without you doing anything.  

There are, however, steps you and the credit counseling agency can take to help you pay back your debts and get out of a financial rut – legally.  Knowing this will help you avoid debt relief scams when you see them.

Contact a legitimate credit counseling company.  

Hire only an agency that offers transparency in terms of their identity as a business or organization, their location and the type of services they offer.  Legitimate companies have nothing to hide, so to speak, and will be more than willing to tell you about who they are, what they can do for you, and how they will help you get debt help.  

A legitimate company will not charge you exorbitant fees.  In fact, you should not pay more than $25 as set-up fee and only compensate the company for their work after they get you the results they promised.  The company should also be accredited with either the National Foundation for Credit Counseling or the Association of Consumer Credit Counseling Agencies.

Be wary of illegal steps to manage debt.

The only way to get out of debt is to pay back what you owe.  Companies running scams will often advice dubious procedures to erase debt, such as withholding payment to your creditors, getting another credit report not with your Social Security number but with an Employer Identification number and the like.  This is detrimental to your goal of reducing your debt.  Not only will this raise your interest rates and cause your debt to balloon, it can also get you sued. 

Avoid companies with no clear game plan.

There should be a written agreement between you and your credit-counseling agency that clearly states in detail the type of services they will provide, along with the total cost, payment terms and duration.  If there are any guarantees offered, these should also be included in your contract.

Always know where your money goes.

If all goes well with your debt assistance agency, you will be mailing them a check as payment for your debts.  The company will then divide the amount among your creditors to pay off what you owe.  To make sure that you are not dealing with debt relief scams, always check with your creditors to determine whether the payments have actually been made.  It will require small steps and time to get out of debt but with patience and common sense, you will be able to enjoy a future of financial stability.