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For consumers considering debt settlement, many are concerned
about the fee structure of their proposed program. Some prefer that
the fee is flat, that they know the exact cost of the service prior
to enrolling. On the other hand, some consumers prefer that the fee
is a percentage of the savings---this way the best interests of the
client is completely in line with the best interests of the
settlement company. Both of these are conclusions are very logical,
so what is in fact the best fee structure for the consumer?
Intuitively, the fees being based on the settlement percentage seems
to have the best interests of the client in mind. However, many
clients end up paying far more by having this structure in place
because of hidden fees, monthly maintenance fees, and most still end
up paying an up front retainer or set up fee. Some settlement
companies charge as much as 30% of the savings on the settlement,
which can be extremely pricey. Consider the following:
A $10,000 balance is settled for $4,000. The consumer paid $500 up
front to enroll, plus monthly maintenance fees of $25 for 24 months
before the account was settled. Since the savings were large, the
consumer ends up paying another $1800. All together the total cost
is $2,900. Sure you save some money, but nearly as much as if the
fee was based on the debt amount at the time of enrollment.
Another little known fact about savings-based fees is most companies
make you pay the fee after each settlement, not once the program is
completed. In other words, although the fees are necessarily up
front, you still have to pay fees before all your accounts are
settled. In some instances, this gives the settlement company the
incentive to negotiate the accounts with the lowest possible
settlement first, instead of the creditor that’s most aggressive and
more likely to pursue legal action or perhaps another account that
the client would prefer settled immediately, such as one with a
co-applicant or one that is harassing them.
To be fair, one of the downsides of a flat fee model is that in
the event you drop out you will have paid fees before any results
are achieved. Some also argue that that flat fee model prevents
consumers from being able to save money aggressively to make
settlements since too much of the payment is going to the fees.
Clearly the issue of the best approach to paying fees in a debt
settlement program is an important, and before making any decisions,
it is essential that you first investigate your options and consider
them in light of your individual situation.
If you would like to learn more about our debt settlement service,
please feel free to call (877) 274-1260 or
fill out a form
and we’ll contact you as soon as possible.
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