Personal Finance
April 21, 2015

Is Debt Settlement Worth It?

Simple. Thrifty. Living.

If you’re struggling with more bills arriving each month than you’re able to pay, you might consider working with a debt settlement company (which is different from a debt consolidation company, although many do both). Debt settlement companies can be helpful, and Consumer Reports encourages consumers to learn about how these services work before making any agreement. Here’s what you need to know to determine whether debt settlement is right for you.

Debt settlement companies approach your creditors and negotiate a plan in which each creditor agrees to cancel the loan for less than what you owe in exchange for a lump sum payment. Once this agreement is made, you pay a monthly amount to a special deposit account set up through the debt settlement company. You also pay fees to the debt settlement company for its services. When the amount in your deposit account reaches the level that one of your creditors has agreed to settle for, the settlement company pays the creditor, ending the debt.

A Chase card services representative quoted in Consumer Reports states that Chase doesn’t give debt settlement companies better terms than it gives individual cardholders who contact them on their own. If you can get access to a lump sum of money, from a family member or some other source, it’s worthwhile to call up a creditor yourself and simply ask whether it will accept less than the total amount you owe if you pay a lump sum. Even if you have to do some saving up, you can still talk to a creditor about a plan for paying off the debt in a few months for less than you owe.

  • If you already have poor credit and are losing sleep over bills you can’t pay, having a legitimate debt settlement company negotiate on your behalf can feel reassuring.
  • If you are not fluent in English or if you feel uncomfortable making phone calls to creditors, a responsible debt settlement company can provide you with a friendlier pathway out of debt.
  • You may pay a percentage of your debt up front to the settlement company, plus a monthly fee, and then a percentage of any money the debt settlement company ends up saving you.
  • Debt settlement causes significant damage to your credit rating, so you should not consider it if you have good credit.

You can gain a good understanding of debt settlement by reading the government’s FTC page about this topic. Be aware that the IRS considers any amount of debt that is forgiven as income, and you will have to pay income tax on that amount. Before deciding on debt settlement, you will probably benefit from a free consultation with a consumer credit counselor or a bankruptcy lawyer. When you’re in debt, you have several options, and it’s a good idea to explore all of them before choosing one.

National Debt Relief is one of the most reliable and well-known debt settlement services. It not only offers debt settlement, but also debt consolidation and other debt relief services.

National Debt Relief Review

National Debt Relief website

National Debt Relief Review image
  • Price: 18-25 percent of enrolled debt is the National Debt Relief price for helping to negotiate your debt reduction.
  • Debt Qualifications: To qualify for National Debt Relief services, you must have at least $7,500 in qualifying debt.
  • Features: Working with National Debt Relief gives you access to a toolbox of options for reducing your monthly outlay on debts. You can pursue everything from National debt consolidation to debt relief, and even bankruptcy services are available if you are unable to keep up with your existing debts.
  • Customer Service: Keeping up with your debt relief program is quick and easy with plenty of contact options. You can always call toll-free during extended service hours on any weekday. Email and fax are also available for anyone who needs to make contact with their debt relief counselor.

Price: National Debt Relief is one of the more affordable debt consolidation services. First, it doesn’t charge a monthly service fee like most other debt consolidation and settlement services. They do, however, charge 20 percent of whatever you end up saving by using their services. So if your debt is $10,000, and you end up paying only $9,000, they would receive $200. On the plus side, you can get a quote and a consultation for free with National Debt Relief.

BBB Rating: A (Also accredited by both the American Fair Credit Council and the International Association of Professional Debt Arbitrators.)

Features: National Debt Relief has the most features of any other debt consolidation and settlement service that we saw. It includes a free quote, flexible payment schedule, services for secured and unsecured loans, professional advisors, self-help tools, mobile access to their site and budget planners. They also allow you to have a co-signer, which is important for most people who are stuck in debt.

Guarantee: One of the reasons we like National Debt Relief is because of their 100% money back guarantee. This apparently is fair game if the service doesn’t work for you or if you are not completely satisfied with the service, although we did not test to see how easy it is to get your money back with the guarantee.

Customer Service: The site also has a comprehensive customer service program, including access to a representative by phone, chat, email and social media. Although not always the speediest, the customer service answers to our questions were always helpful and informative.

You can get a free quote and consultation from National Debt Relief here or you can call them at (844) 732-1190.

CuraDebt was founded in 1996, which means it has been in business for more than a decade longer than National Debt Relief, but it isn’t as respected at National Debt Relief and doesn’t offer a guarantee, which is why it is the runner-up.

CuraDebt Debt Relief Review

CuraDebt website

CuraDebt Debt Relief Review image
  • Management tools: Along with debt settlement services, CuraDebt also offers debt management tools and help so you can reduce your debt while you are trying to settle it.
  • Price: Unlike most debt settlement programs, CuraDebt offers a flat rate regardless of your circumstances or debt: 20 percent of the settled debt. Unfortunately, they also charge a monthly fee of $10.75.
  • Time frame: Like most debt settlement companies, CuraDebt’s settlement plan usually lasts between 24 and 48 months.
  • Other highlights: CuraDebt also allows you to settle business debts, and provides you with a personal advisor to walk you through the settlement process.
  • Available states: CuraDebt offers debt settlement in 38 of the 50 states, which is higher than most other debt settlement companies, but still limited.
Disclosure
Disclosure

*CuraDebt doesn’t offer debt consolidation, only debt settlement, but can be a good option for debt settlement.

Price: CuraDebt is a little more expensive than National Debt Relief. They charge a $59 monthly fee plus 20 percent of what you save on the initial debt. It’s a little cheaper for debt settlement; there is no monthly fee, but they still charge 20 percent of what you save on the initial debt.

BBB Rating: N/A (Also accredited by both the American Fair Credit Council and the International Association of Professional Debt Arbitrators.)

Features: CuraDebt offers most of the same features that National Debt Relief does, including free quote, flexible payment schedule, services for secured and unsecured loans, professional advisors and self-help tools. One of the things that CuraDebt doesn’t offer that National Debt Relief does is the option of having a co-signer. They also don’t offer mobile access to your account.

Guarantee: CuraDebt doesn’t offer a money back guarantee.

Customer Service: CuraDebt only offers phone and email customer service options, which limits your options. It can be difficult to get an answer, but the customer service representatives are usually helpful and friendly.

You can get a free quote and consultation from CuraDebt here or call CuraDebt for a free consultation about your debt at (888) 753-3619.

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