When you’re struggling with high amounts of debt, it can be tempting to take advantage of quick fixes. Often, debt relief services market themselves as an efficient solution to alleviate the strain caused by financial difficulty. This can be true but can also leave people vulnerable to scams and inaccurate marketing. Today, we’re exploring what debt relief services are and how you can determine what legitimate options are available for your financial assistance.
What are debt relief services?
Debt relief services are professional services that work to alleviate and negotiate your debts, saving you significant time for a nominal cost. Their main role is to work with lenders to accept lower rates of payment or completely halt any form of payment for your outstanding debt. While these services are considered legal, they may actually hinder your financial success in the long run. This is especially true if you run up on a scam scheme, which can be especially prevalent in the debt relief field.
Is debt relief safe?
If done correctly, debt relief can be considered safe. However, there are a wide array of risks that you open yourself up to if you rely on debt relief services to resolve your debts. Common risks include:
- Late payments: Debt relief companies work by pooling your monthly funds into a separate account. They use this to “repay” credit card companies or other lenders at lower rates. However, delays can happen. Your account may be in between acceptance or in the hands of an inexperienced financier. There is a risk of your funds not making the transfer at all in either case. This is exacerbated if you run into a debt relief scam, as they will simply do away with your money.
- Lower credit score: Many debt relief agencies emphasize that your score could go up by reducing your overall debt load. Unfortunately, this is not often the case. A major indicator of credit health is your repayment history. If a debt relief agency negotiates dismissal of your payments to a specific lender, the nonpayment may still be listed on your credit report. Over time, this can result in an overall lower score and harm your ability to secure large-scale purchases using a line of credit or repayment structure.
Is debt consolidation the same as debt relief?
While many debt relief services do use these terms interchangeably, it is not considered to be the same thing. Consolidation is when you take a personal loan out to knock down debts with high-interest rates. You can simplify your financial payment plan that way, paying only 2-3 monthly obligations rather than the total number that you may have. It can also halt the rolling stone of additional late fees, interests, and administrative fees that can perpetuate debts long after the principal is paid.
Relief works to negate the payment entirely or argues on your behalf for a lower overall monthly rate. It is not the same as consolidation. One of the most vital differences is the fact that you must pay a fee for relief, whereas with consolidation you won’t be paying any monthly costs (excluding the new rates of monthly repayment that you were originally obligated to).
What are the signs of a debt relief scam?
Those running debt relief scams can prey on vulnerable populations, such as those with dire financial situations, elderly populations, or young and inexperienced debtees. The goal of these scams is often to take your money without any intention of debt repayment on your behalf. They are also incredibly difficult to legally settle, find, and rectify, as scammers have gotten increasingly strategic with their methods of illegally obtaining and storing your money.
The consequences of falling into these types of scams are dire — leaving you with low credit scores, delinquent accounts, and significantly less money than what you started with. No matter how technically savvy you may be, it’s important to understand the warning signs of a debt relief scam. Below are a few signs that you may be speaking to a scammer regarding your debt relief options:
- They make guarantees: Guarantees are never present in a true debt resolution process. Agencies are aware that lenders are within their rights to deny the negotiation process or any form of lower payment plan. After all, when you take the credit line, you sign releases and an agreement that you will repay the debt at the agreed-upon rates. If the person that you are speaking to begins guaranteeing you security in your financial future, there’s a strong chance that they are not legitimate.
- They try to get immediate payment: While you will be expected to pay the debt resolution company for their services, scammers are known to ask for money up-front, outside of any sort of contract with you. This is a massive red flag and should discourage you from continuing with them.
Ascent Law is here to assist you with legal disputes regarding your debts. For more information about how you can find financial freedom today, please visit our website or give us a call at (801) 432-8682.