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National Debt Relief Review: Does Debt Settlement Perform?
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National Debt Relief Review: Does Debt Settlement Perform?
by Steve Nicastro Steve Nicastro is a former NerdWallet writer and the authority on personal finance.
loans and small business. His work has been featured on USA Today, The New York Times and MarketWatch. He holds a bachelor’s diploma of journalism at Quinnipiac University.
Nov 12, 2020
Editor: Kathy Hinson Lead Assigning Editor Personal finances, credit scoring managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team director of design and editing. Prior experience includes news and copy editing for several Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in journalism and mass communications at The University of Iowa.
A majority of the items featured on this page come from our partners who pay us. This affects the products we review and the location and manner in which the product is featured on a page. However, this doesn’t influence our evaluations. Our opinions are our own. Here’s a list of and .
National Debt Relief is a company for debt settlement that negotiates on behalf of customers to reduce the amount of debt they owe with their creditors.
The debt settlement program reduce their total debt by 30 percent after the program’s fees, according to the company.
However, NerdWallet cautions you that investing in debt it is a risk to invest in National Debt Relief or any of its competitors, is not safe:
Debt settlements can be costly.
It can destroy your credit.
It can take a long time. Getting any net benefit requires adhering to a plan long enough to settle all your debts — often two to four years.
NerdWallet suggests debt settlement only in the last instance option for those who are in arrears or struggling to pay minimum payments on unsecure debts or have exhausted other options. For many people, it provides a quicker path to settle debt. It also protects them from being legally sued, which is a risk while enrolling in a debt settlement program.
Collaboration on National Debt Relief
What is the criteria to be considered for eligibility: National Debt Relief works with those who have at least $7,500 or up to $100,000 of unsecured financial debt that comes from credit cards as well as personal loans and lines of credit, medical bills, business debts and private student loan debts.
National is not able to settle debt due to lawsuits IRS obligations and back taxes, utility bills , or Federal student loans. The company is unable to settle home or auto loans, or other types that are secured (debts that have collateral).
The average client owes more than $20,000 of total debt, according to Grant Eckert, chief marketing officer of National Debt Relief. National does 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 state-specific regulations that vary, National is not available in these states: Connecticut, Georgia, Kansas, Maine, New Hampshire, Oregon, South Carolina, Vermont and West Virginia.
The process of debt settlement begins when you contract with National Debt Relief, you create a savings account for yourself. Instead of paying debtors, you deposit each month a payment into the account. National determines the monthly payment level, which is often lower than the total monthly payments for customers’ unsecure debts.
Ceasing payment to your creditors means you become delinquent on your accounts, and you will be charged interest and fees for late payments as well as your credit score is likely to plummet.
National Then, it negotiates with creditors on your behalf in an effort to negotiate with them for lesser than the amount you owe. Since you’re no longer paying the creditor, they might see a reduction in amount as better than risking no payment in the first place.
If they can reach an agreement, you will pay the lender from your savings account either as a lump sum or in installment payments. The first settlement is typically within three to six months, as per Eckert.
Costs: A company pays a fee when a debt is paid off. Since 2010, it has made it unlawful for debt settlement firms to charge upfront fees.
National’s fee ranges from 15% to 25% of your total enrolled debt, depending on the amount that you owe as well as the state that you reside in.
Debt settlement programs also typically require setup and monthly fees to maintain an account for savings. National has not confirmed if its programs require this fee.
Save Money: National Debt Relief claims its clients realize an approximate savings of 30% when taking into account its costs. This savings is only applicable to clients who stick with the program until all of their debt is paid. Although National states that most people who sign up for the program stay with it, there are some who opt out due to a variety of reasons, such as not being able to accumulate enough money to pay off the debt.
Timeframe: On an average National says that those who finish their debt settlement program through National do so 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 approximately 30 percent. By comparison, competitor says its customers see savings of 15%-35% when including costs.
Minimum debt requirements: National Debt Relief requires an amount of at least $7500 in unsecure debt to be eligible for the program, which is the same as Freedom.
Experience with customers: The business has been accredit by the A+ rating as well as more than 80 customer complaints in the last three years. These complaints focused on issues with the service or product or billing issues, collection and billing problems, as well as advertising and sales issues.
Freedom Debt Relief has more than at the Better Business Bureau in the same timeframe.
Dangers associated with settlement of debt
Debt settlement is a risky process that comes with high expenses and risk, such as:
Your credit score will plummet Since the process of debt settlement requires you to stop making payments on outstanding debts, late payments will be reported on your credit reports as well as your scores on credit drop.
Additionally, every settled account will be listed based on the date the account first became delinquent. This can affect your credit score.
You could still be receiving calls from the debt collection agencies or creditors. There’s no assurance that your creditors will be willing to collaborate in conjunction with National Debt Relief, and you might receive calls from debt collectors or accused of being sued by creditors during the course of your process.
Fees and interest continue to accrue when you sign up for the debt settlement program and your account is deemed to be or remain delinquent that will lead to an increase in interest and late charges. If you don’t stick with the program until the end or should National cannot agree to a settlement, then you could be stuck with the larger amount.
Forgiven debt may be considered taxable income: Forgiven debts over $600 may be counted as income for tax purposes. Creditors can mail a 1099-C to you via mail and directly to IRS. An exception to this is if are declared insolvent (your liabilities exceed your total assets) at the time that the company settles your creditors.
National Debt Relief vs. other options
The majority of customers who join National Debt Relief are not delinquent on their debt according to Eckert. They’ve made timely payments but have only made minimum payments, or are on the verge of becoming behind.
For many facing this dilemma There are alternatives and .
Debt management plan
You’ll pay a non-profit credit counseling company to combine your debts into one monthly payment, while also reducing the interest rate in order to pay off your debt faster. This is a great option for consumers in credit card debt that have an income that is steady enough to pay the debt in 3 to 5 years. In contrast to credit card debt settlement and debt management, a debt management strategy will help to improve your score on credit.
Consolidation of debt
When you consolidate debt means that you consolidate several debts into a single credit card using a balance transfer credit card , home equity loan or line of credit or 401(k) loan. The new debt will have a lower rate of interest, which can make payments easier to manage and also help you pay off your debt more quickly, and avoid damaging your credit.
Bankruptcy
Bankruptcy lets you resolve your debt under protection from a federal court. It erases the majority of debts within three to six months . It cleanses your slate and you might even get to keep certain assets. It will stop the calls from collectors and stop lawsuits against you. Like the debt settlement process the credit of your client will be affected, but research shows credit scores rebound quickly.
DIY debt settlement
You could pick up the phone and call your creditors to bargain with them. Similar to using a debt settlement service the chances of success aren’t 100 however, especially in the case of only one or two creditors, it can reduce time and cost.
Author bio Steve Nicastro is a former NerdWallet expert on personal loans and small-business loans. He has had his work highlighted by The New York Times and MarketWatch.
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