There are many debt relief programs being advertised on the TV, radio and Internet. How do you know which one to choose? - Andrea

 

It’s hard to get through your favorite TV show without an ad promising fast and easy help getting out of debt. But the reality is, it’s easier said than done.  

If you are drowning in debt,  whether its mortgage, credit or any other type,  there are several programs out there to help you navigate your back to sound financial footing.

Choosing what type of relief program depends on your debt load and type.

Debt consolidation programshelp an individual take out one loan to pay off several debts.  The plans consolidate several loans into one monthly statement and payment.  You can consolidate your debt by using your home's equity to help secure a lower rate.  Keep in mind interest payments are often tax-deductible, which is not the case for credit-card payments.

If this is the route you take, do research: Read reviews on different programs and make sure it is legitimate. Look for companies who are recognized by trade industry associations such as the Better Business Bureau or the Association for Settlement Companies (TASC). http://www.tascsite.org

When a new company is accepted into TASC, they are given a 30 day trial to see how they interact with the consumers. “During that 30 days that they’re with us, we secret-shop them, posing as a consumer that’s in need of some relief,” says Executive Director David Luethold.

Credit or debt counseling programsare usually non-profit organizations that help consumers create a plan to help pay off a debt over a set period of time. States regulate their fees to protect consumers. 

Debt settlement companiesact as a mediator between consumers and creditors. They work to create a regular monthly payment schedule with the debt settlement company and they deal with the creditors. Often you don’t end up paying the debt in full, but your credit score will take a significant hit.

Avoid Scams

It’s a good idea to keep in mind the adage of “if it sounds too good to be true it probably is.”  

 

 “When a company says ‘If you sign up with me, I’ll stop all of your creditor calls’ that’s a big red flag,” says Luethold. “If a company says that they can help you and your payment is going to be $300 a month and they guarantee that in 30 months, you’ll be totally debt free—again, red flag. There are no guarantees in this business.”

Promises of all-inclusive fixes should also raise a red flag.  “If an organization tries to combine debt relief with credit repair, it’s pretty likely that it’s some kind of scam,” says Mark Hoewing, the public relations manager at InCharge Debt Solutions, a non-profit credit counseling service (http://www.incharge.org).

With whatever method you choose, make sure to tackle the problem head on. ““It took years to get into this debt,” says Hoewing. “There’s no magic potion that’s going to eliminate the debt without a process and taking some time to repay or settle the debt.”