Paying off debt is not always an all-or-nothing proposition. That is, some people are able to successfully settle one or more of their debts — i.e. reach an agreement with creditors to pay off a portion of the total on a mutually agreed-upon schedule.
Why would creditors possibly agree to accept part of a payment rather than the whole thing? Because in situations in which there’s a risk of the borrower defaulting altogether, getting some of the balance is better than getting none. For borrowers who’ve recently experienced a financial hardship or fallen behind on payments, there may be some bargaining power here. However, creditors won’t always accept a settlement offer, so there is a degree of chance involved.
Some people do decide to undertake settlement attempts on their own, getting a plan for saving up the money they need as leverage and speaking directly with creditors. Other people find it helpful to work through a debt relief program. This offers a bit more of a guided experience, requires participants to deposit a customized amount into a special account each month ahead of time and outsources the negotiations process to trained professionals.
If the latter sounds more workable for you, consider how you can go about finding the best debt relief program for your needs.
Here are some questions to ask along the way.
Is There American Fair Credit Council (AFCC) Accreditation?
In addition to finding a program for which you’re eligible, you want to avoid scams and poor performers. Unfortunately, there are individuals and organizations out there trying to target people with debt.
eleted: One watchdog of the debt relief industry, the AFCC, accredits companies when they adhere to a code of conduct — like collecting fees only after resolution of a debt rather than beforehand — and pass third-party audits to ensure they’re compliant. This makes the AFCC site a good place to start when you’re looking for a new debt relief program with which to work.
What Kind of Debts Are Accepted?
Perhaps the most basic aspect of settlement as a strategy is ensuring the types and amounts of debt you carry qualify for this approach. Many programs have a minimum threshold — like $5,000 or $10,000 — to qualify.
Debt settlement programs typically only work with unsecured debts, or those not backed by a specific asset. Common examples include credit card balances, medical debts and personal loans. Some private student loans are also accepted by various programs, although federal loans are usually not. If you’re struggling with auto or home-related debts, you’ll have to work with those creditors to come up with a plan — as secured debts are not usually candidates for relief programs.
What Do Customer Reviews Say?
Word of mouth is a powerful thing, and people like to share whether they’ve had positive or negative experiences on their debt relief journeys. Check out consumer reviews for any program you’re considering to learn more about others’ experiences after signing up.
If a large percentage of the reviews you’re finding are negative, or there’s a lack of online reviews about a program altogether, is usually a red flag. However, it’s also a red flag if companies have only positive reviews available — as they may be filtering out people’s honest opinions. Companies with a strong track record should have some negative reviews, but most others will offer insight into customers who were able to successfully resolve one or more debts.
Finding the best relief program for your debt is a matter of making sure the type and amounts of debt you carry are a good match as well as avoiding scams and unqualified organizations.