How Debt Settlement Companies Charge
Debt settlement is one of the most popular ways to eliminate credit card debt because it helps you get rid of a large portion of your debt without paying it back. Credit card debt settlement can be very effective in many consumers turn to debt settlement companies to help them with this task. If you are in the market for a credit card debt settlement company to work with, you have to consider the fees that they charge.
Upfront Fees
Some companies in this industry charge upfront fees in exchange for the work that they do. With this type of fee structure, you have to come up with a lump sum to pay the settlement company as well as to pay your creditors. This type of fee structure can be risky for you because you’re never really sure what the company will do. Some scam companies have used this method to take the fees and run, never really providing any service of value.
Percentage of Debt
While some companies charge an upfront fee for this service, others use a method that is based on a percentage of the total debt. With this strategy, the company looks at how much debt you need to settle and then charges a percentage of that amount as its fee.
Other companies use a variation of this model and instead charge a percentage based on the total amount that they save you. This method can be advantageous because it provides the company with an incentive to save you the most money.
Flat Fee
Another model that some companies use for their services is to charge a flat fee to their customers. This fee is typically charged on a monthly basis. Many companies in this industry encourage their customers to set up a bank account and save a certain amount of money each month to build up money to settle with. During this phase, the settlement companies also negotiate with your creditors. In exchange for the negotiation process and the guidance that they provide, the settlement companies require a monthly fee until the settlement is completed. This method is sometimes preferred by individuals who do not have much money to attribute to the debt settlement and would prefer not to pay a percentage of the debt.
Regardless of which type of company you decide to work with, make sure that you’re working with a legitimate provider. Otherwise, you may end up paying money to a company that will not follow through on its promises.
see related: Settlement Companies Should Never Charge Up Front Fees
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