- 1). Determine whether debt consolidation or debt settlement is right for you. The Better Business Bureau states that promises of debt elimination are almost always fraudulent. Debt consolidation groups your debt into one large sum that requires a lower monthly payment. It often costs more in the long run, but can be a short-term relief. Debt settlement, or debt renegotiation, means creditors are willing to reduce your debt for immediate payment of a percentage of the owed amount. It can alternatively result in a reduction of interest rates so the debt can be paid in full faster. Debt settlement can negatively impact your credit score because creditors will cancel accounts upon payment.
- 2). Contact the Better Business Bureau for a list of debt relief companies in your area. The BBB will have company ratings and notes on complaints.
- 3). Select a handful of companies to comparison shop.
- 4). Ask each company about its debt relief programs. Make sure each debt relief program follows the new Federal Trade Commission rules. The company must successfully renegotiate, settle, reduce or change the terms of at least one of your debts before collecting a service fee. You should have a signed contract and have made one payment to the creditor before paying a service fee.
- 5). Get questionable claims in writing. Claims to reduce debt by 50 percent are possible, but not typically feasible. Ask for a detailed explanation of how they can reduce your specific debt by 50 percent.
- 6). Choose a company you trust. Don't choose a company if the claim seems too good to be true, or if a business representative does not seem honest. There are plenty of companies to consider before choosing the right one.
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