Sometimes, you find yourself in debt and just can’t see a way out. There are companies that will help you with debt relief, but you have to be careful to protect yourself against debt relief scams.
What is debt relief?
Debt relief generally doesn’t mean that your debt just goes away, contrary to popular belief. Debt relief just makes your debt easier for you to handle.
Debt relief can be:
- Interest rate reductions
- Changes to credit card or loan repayment terms
- Reducing the principal amount owed
- Consolidating debt
- Loan refinancing (Source)
What are some debt relief scams?
Debt relief scams tend to look like legitimate offers, but they end up charging you a huge up-front fee for not doing very much for you at all. Right now, some very common debt relief scams are looking at the Biden-Harris Student Debt Relief plan and then contacting claiming to be the official way to file for relief. It’s important to note that this student debt relief plan does not have any fees attached – so if you find someone filing for a fee, it’s a scam.
What should you look out for?
Does it seem too good to be true? Then it probably is. That’s the key to many scams. It can be hard to ignore these kinds of big promises, especially when you’re in a financial hole. But debt relief, while it exists, isn’t magic. It’s not going to be perfect and it won’t necessarily be easy, but it can help.
Are they charging a fee before doing anything for you? Absolute red flag. Don’t use this company.
You can check out the Consumer Financial Protection Bureau’s page on debt relief and check out the companies that have complaints filed against them.
You can also start with free credit counseling to get professional help with figuring out your next steps rather than going straight to a debt relief company. They may also be able to point you in the direction of a legitimate company to use.
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Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.
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