National Debt Relief Review What is the best way to resolve debt? Debt Settlement Effective?
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National Debt Relief Review: Does Debt Settlement Perform?
by Steve Nicastro Steve Nicastro is a former NerdWallet writer as well as an expert on personal finances.
loans and small-business loans. His work has been featured on USA Today, The New York Times and MarketWatch. He has a bachelor’s degree in journalism from Quinnipiac University.
Nov 12, 2020
Written by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring financial management and debt Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in positions such as copy desk chief and team director of design and editing. Her previous experience includes copy editing and news for various Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in journalism and mass communications at Iowa’s University of Iowa.
The majority or all of the items featured on this page are from our partners, who pay us. This influences which products we review and where and how the product is featured on a page. However, this does not affect our assessments. Our opinions are our own. Here’s a list and .
National Debt Relief is a company for debt settlement that negotiates on behalf of consumers in order to reduce the amount of debt they owe with their creditors.
Customers who participate in its debt settlement program reduce their credit card debt by about 30% after its fees, according to the firm.
However, NerdWallet warns against this , whether through National Debt Relief or any of its competitors, is not safe:
Settlement of debts can be expensive.
It could destroy your credit.
It can take a long time. In order to reap the benefits, it is necessary staying with a program for enough to cover all of your debts, which is usually up to four years.
NerdWallet suggests debt settlement only as a last resort to those who are delinquent or struggling to make minimum payments on unsecure debts or have exhausted other alternatives. For many people, it provides a quicker path to resolving debt. In addition, bankruptcy protects people from being legally sued, which is a danger when you are enrolled in a debt settlement program.
Collaboration with National Debt Relief
How do you qualify? National Debt Relief works with those who have at least $7,500, and up to $100,000 in unsecure financial debt that comes from credit cards, personal loans and credit lines such as medical bills, personal debts, and private student loan debts.
National doesn’t settle any debt due to lawsuits IRS obligations and back taxes, utility bills or federal student loans. It isn’t able to settle home or auto loans, or other types of debt secured by collateral (debts with collateral).
The average client owes more than $20,000 of total debt, as per Grant Eckert, chief marketing officer at National Debt Relief. National conducts a soft credit pull as part of the application process to verify your creditors and outstanding balances owed on each debt according to Eckert. A does not affect your credit score.
Due to varying state regulations, National is not available in these states: Connecticut, Georgia, Kansas, Maine, New Hampshire, Oregon, South Carolina, Vermont and West Virginia.
The debt settlement process is as follows: When you sign up with National Debt Relief, you create a savings account under your name. Then, rather than paying your creditors, you deposit monthly payments into this account. National decides the monthly payment amount, which is usually lower than the total monthly payments for customers’ unsecure debts.
Refraining from paying your creditors will result in you becoming late on your accounts, and you will be charged penalties for late payment and interest, and your credit score will tumble.
National Then, it negotiates with individual creditors on behalf of you in order to convince them to settle for less than what you owe. Because you’re no longer paying the debtor, it may view getting a reduced amount as better than putting up with not making any payment in the first place.
If they come to an agreement, you pay the lender from your savings account either by lump sum or installment payments. The first settlement typically happens within three to six months, as per Eckert.
Price: This company pays an amount when a debt is settled. Since 2010, it has made it unlawful for debt settlement firms to charge upfront fees.
National’s fee ranges from 15% and 25% of your total enrolled debt, based on the amount you owe and the state you live in.
Debt settlement programs also typically require monthly and set-up fees to keep the savings account. National has not confirmed if its programs have this requirement.
The savings: National Debt Relief claims its clients can expect reduction of 30% including the program’s fees. The savings are only available to those who remain in the program until all of their debt is settled. While National states that most people who join the program complete it, there are some who opt out due to a variety of reasons, including the inability to save enough funds to pay the debt.
Timeframe: On average National claims that customers who complete their debt settlement program through National will complete the program within two to four years.
National Debt Relief at a glance
National Debt Relief vs. Freedom Debt Relief
Savings average: National Debt Relief says its clients see savings of around 30%. By comparison, competitor says its customers can save between 15%-35 percent when you include fees.
Minimum debt requirement: National Debt Relief requires at least $7,500 of unsecured debt to qualify, the same amount as Freedom.
Experience with customers: The business is accredited by the with an A+ rating as well as more than 80 customer complaints over the past three years. These complaints focused on issues with the service or product as well as billing and collection issues, and advertising and sales issues.
Freedom Debt Relief has more than the Better Business Bureau in the same time frame.
The risks of debt settlement
Settlement of debt comes with significant cost and risks, which include:
Your credit score will plummet Since debt settlement demands that you stop making payments on outstanding debts Late payments will be noted on your credit reports, and your credit scores will drop.
In addition, every account that is settled will be listed starting from the date the account was first in default, which could affect your credit score.
There is a chance that you will be contacted by creditors or debt collectors: There’s no assurance that your creditors will be willing to collaborate with National Debt Relief, and you could receive calls from debt collectors or even be accused of being sued by creditors during the process.
Fees and interest remain in the process of accruing When you join an agreement to settle your debt, your accounts will become or remain in delinquency, which will result in more interest and late fees. If you don’t stick with the program to completion or if National can’t reach a settlement, you could end up with the larger amount.
The debt that was forgiven could be considered income tax deductible: Forgiven debts over $600 may be included as income on your taxes. Creditors may send a 1099-C form to you in the mail or for the IRS. One exception is if you are declared insolvent (your liabilities exceed your total assets) when the company settles with your creditors.
National Debt Relief vs. other options
The majority of clients who join National Debt Relief are not delinquent on their debt as stated by Eckert. Rather, they’ve been making timely payments but have only made minimum payments, or are on the verge of falling behind.
For many people who are in this position, there are alternative and .
Debt management plan
You’ll pay a non-profit credit counseling agency to reduce your debts to one monthly payment and reduce the interest rate to help pay off your debt faster. This is a great option for people with credit card debt who have an income that is steady enough to pay the debt within the three-five years. Contrary to credit card debt settlement and debt management, a debt management strategy can help you improve your score on credit.
Consolidation of debt
With debt consolidation means that you consolidate multiple debts into one debt via the balance transfer credit card or the home equity loan or line of credit or 401(k) loan. The new debt will have a lower interest rate, which can make payments more manageable and help you pay off the debt quicker, while also avoiding damaging your credit.
Bankruptcy
Bankruptcy is a way to resolve your debt while protected by the federal court. It erases the majority of debts within three to six months and clears the slate, and you may get to keep some assets. This will stop collector calls and prevent lawsuits against you. Like debt settlement credit, it can affect your credit but studies show that credit scores improve quickly.
DIY debt settlement
You can pick up the telephone or contact your creditors and discuss the matter with them on your own. As with using a debt settlement company, success isn’t guaranteed, but especially if you owe only one or two creditors, it could save you time and money.
The author’s bio: Steve Nicastro is a former NerdWallet authority on personal loans as well as small-business. He has had his work featured by The New York Times and MarketWatch.
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