Do Debt Relief Services Help or Hurt?


“Be debt free in 12 months!”

"Let us take on the credit card companies!"

“Cut your debt in half in just minutes!”

Many debt relief services make a lot of promises. With so many consumers drowning in debt, their slogans can seem like a lifeline. Unfortunately, a number of these services can actually cost you more money than if you attacked your debt in other ways. So before you turn over your debt information to anyone, make sure you are not jumping out of the frying pan and into a fire.

Some shady debt relief services are out to profit on your debts. They promise to renegotiate your debt to a fraction of what you owe. But to do so, they usually charge hefty upfront and ongoing fees. Not all debt relief services are dishonest, but if you see an advertisement, that’s usually a red flag. Most reputable debt relief organizations don’t actively solicit debtors because they are they are not looking to profit.

And while you may have to pay a fee for help, the fees should be reasonable and only due after service has been provided. If you have to pay more than a $50 set-up fee and/or more than $25 per month, that’s probably too much.

If you need help restructuring your finances to pay off your debt, the National Foundation for Credit Counseling can refer you to reputable debt-relief organizations in your area. The foundation requires member organizations to live up to strict financial and ethical standards of practice. The member debt counselors will work with you to create a debt repayment plan and get your finances in order. If you have several high-interest loans, you may be counseled to get a debt consolidation loan at a lower interest rate. Your personal debt counselor can direct you toward reputable lenders for debt consolidation.

Not interested in using a counselor? The truth is you can negotiate your own debts down without the help of fee-charging services. Many creditors will work with you to lower or waive interest and/or late fees if you are unable to pay. You don’t need to pay to get this done; you just need to pick up the phone.



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