Debt burdens millions of consumers each year. This creates challenges in managing monthly cash flow and working toward other financial goals. Credit cards, personal loans, or medical bills rule an individual’s life in the worst way. When debt becomes too much of an obstacle, debt settlement may be an answer.
Debt settlement services offered from a variety of companies across the United States help consumers reduce what they owe to creditors. With the right debt settlement, negotiated payments on unsecured debts bring down the total amount due. However, not all debt settlement companies offer the same services for the same cost.
If debt settlement makes sense for an individual’s situation, understanding the ins and outs of the nation’s largest debt settlement company helps. Our review of Freedom Debt Relief includes services, features, costs, and downsides.
Who is Freedom Debt Relief?
Founded in 2002, Freedom Debt Relief is a California-based debt settlement company offering services to consumers with unsecured debts. Freedom Debt Relief serves more than 600,000 clients throughout the U.S.. The company is responsible for more than $10 billion in resolved debts since its inception.
Each potential client of the company speaks with a Certified Debt Consultant to begin the process. This helps determine if debt settlement options are the right fit. After evaluating an individual’s debt, Freedom Debt Relief provides an estimate of the amount of money and time that could be saved in working through debt settlement services.
Services and Features Offered
Freedom Debt Relief offers debt settlement directly to consumers. The process involves negotiating current debts with creditors to reduce the amount owed. However, debt settlement services do not begin immediately. Instead, Freedom Debt Relief walks clients through four distinct phases once enrolled in the program.
- Build: After determining that debt settlement is appropriate, the company creates a savings account where funds are deposited monthly. This account helps Freedom Debt Relief counselors create a debt settlement plan over time.
- Negotiate: Once the account grows to a certain amount, debt settlement specialists negotiate different payment terms on a client’s debt. This step takes place directly with creditors.
- Settle: When negotiation takes place, Freedom Debt Relief contacts the client to gain approval for the final payment amount.
- Freedom: After the settlement is paid, including fees, clients are debt-free.
The Cost of Service
Freedom Debt Relief services come at a cost, ranging from 15 to 25 percent of settled debts. For example, a client who has $10,000 in unsecured debt could have the company settle debt for $5,000. On the surface, this is a $5,000 savings. However, Freedom Debt Relief withholds 20 percent for its fee, or $1,000. This significant charge means debt settlement could cost the client far more than when negotiating with creditors alone. Also, because the savings account needs funding to cover fees and settlement, the timeframe for debt relief may be prolonged.
The total cost for debt settlement from Freedom Debt Relief varies based on the individual’s specific circumstances and where they live.
Downsides to Consider
Although the services offered by Freedom Debt Relief may result in a lower total amount owed to creditors, drawbacks exist. First, individuals must be behind on their payments for debt settlement to be considered as an option. Missing payments or having accounts in collections drastically reduces one’s credit score. Delinquencies stay on a credit report for seven years, even if a debt ultimately settles for a lesser amount. A lower credit score and multiple missed payments on a credit report make it far more challenging to get approved for credit in the future.
Additionally, debt settlement with Freedom Debt Relief takes more than three years, on average. Clients must fund the savings account continually during that time, so there is enough for negotiating debts. This puts a strain on monthly cash flow.
Also, average savings for clients is 20 to 30 percent, after fees. However, a minimum of $7,500 in unsecured debt is required before Freedom Debt Relief agrees to work with a client. Most importantly, the company does not provide a guarantee that debts will settle.
It is also worth noting recent headlines involving Freedom Debt Relief. In the last year, the company settled with the Consumer Financial Protection Bureau for a lawsuit alleging telemarketing violations and misinformation to customers. The settlement of $20 million provides restitution to those impacted, as well as a $5 million civil penalty. Freedom Debt Relief has thousands of individual reviews online as well, with an equal mix of good and bad experiences. Consider these points before signing up for debt relief with the company.
Freedom Debt Relief may be a viable option for some individuals if they have little recourse for settling debts. However, the cost and timeframe of debt settlement may prove challenging for some. For those who are current on their payments, debt settlement is not an option. Getting a personal loan or finding another avenue for debt consolidation may be a better choice.
Before considering debt settlement, consumers should evaluate their ability to fund the savings account required by the company. Additionally, weighing the cost compared to the benefits helps in making the right decision.