3 Red Flags of a Shady Debt Relief Company

debt-relief-companies

Teenagers who signed loan paperwork to pay for college are now facing decades of burdensome debt.  More than 70 percent of those earning a bachelor’s degree carry student loan debt after graduation, with an average balance of $28,400, according to the White House. This number is not only unsustainable, it’s also rising.

Two types of companies have emerged in response to the student debt crisis.

On one hand, there are many legitimate companies that genuinely help borrowers handle their student loan debt. On the other, a handful of corrupt companies are preying on stressed and financially strapped borrowers.

If you’re thinking about using the services of a private debt relief company to help you manage or consolidate your student loan debt, conduct research before signing any paperwork or paying money to ensure they’re reputable.

3 Signs a Debt Relief Company Is a Scam

Stay on the lookout for the following red flags that will help you to spot and avoid fraudulent debt relief companies.

1. Phrases Such as “Act Fast” or “Limited Time Offer”

A reputable debt relief company will not need you to act immediately. Their offers aren’t “going fast.”

Financial scammers try to hook you based on a fear that you will somehow miss out on your only opportunity to consolidate your debt. Legitimate companies will take their time to work with you and find a solution that is individualized to your unique financial situation.

2. Debt Relief Companies Claiming to be Affiliated with a Government Agency

Scammers are aware that people have a higher trust in government agencies. If a company claims to be affiliated with a federal agency, don’t take the company’s word for it.

Get validation from the source that they are a legitimate debt relief company affiliated with the agency. The easiest way to do this is by visiting that government agency’s website (look for “.gov” at the end of the URL) and see if the entity is mentioned.

If you want to seek student debt relief from the government, start by going to the Federal Student Aid website to learn more about repayment, consolidation, or even debt forgiveness and cancellation.

3. An Upfront Fee to “Guarantee Your Rate”

Never pay any company a fee in order to “lock in” your rate. People have been scammed out of thousands of dollars believing that they were making a wise investment in getting their debt under control. As soon as they hand over the money, the company disappears and their contact phone numbers are suddenly out of service.

Most reputable debt relief companies won’t charge any fees to guarantee a rate.

Finding the Best Debt Relief Companies

Read the terms and conditions

Read the small print, because therein lie the truths of any debt relief offer. Make sure that you understand the guidelines, the contract, and conditions of the offer before signing any documents to agree to their terms.

Look for the APR

Before agreeing to any debt consolidation or relief program, look carefully at the annual percentage rate (APR). The APR isn’t just the interest rate; it also includes any fees or additional costs associated with the transaction.

Some companies will lure you in with a low APR, which lasts only a few months. After your “introductory offer” ends, you may find yourself locked into an interest rate even higher than the rates you left behind when you decided to consolidate with that company.

Look at the Better Business Bureau rating

Not every business is eligible for accreditation from the Better Business Bureau (BBB). The BBB has strict accreditation standards, and even if the business meets all of the criteria, they still may not be accepted by the BBB’s review board.

Thee high standards ensure that any BBB accredited company is trustworthy. If you’re looking for help from a legitimate student debt relief company, check for a BBB rating.

Seek help from nonprofit organizations

Look to non-profits for advice about student debt consolidation or reduction options. Non-profit organizations are created to make a difference in the community and assist people who would otherwise have nowhere else to turn for help.

Reputable Debt Relief Companies

Student Loan Hero is an unbiased solution that helps you organize, manage, and repay your loans. CEO Andy Josuweit graduated with $74,000 in student loan debt and founded the company as a resource for people in a similar situation. So far, more than 20,000 borrowers have managed and repaid over $1 billion in debt working with its partners.

Here are three legitimate banks that can help with student loan debt relief:

SoFi offers undergraduate and graduate student loan debt consolidation and refinancing with rates starting as low as 2.75%. It allows borrowers to refinance both federal and private student loans and doesn’t charge application fees.

Earnest also offers both undergraduate and graduate refinancing with variable rates starting at 2.57% and fixed rates starting at 3.25%. They don’t charge origination fees or application fees.

Citizens Bank offers refinancing and consolidation of both federal and private student loans with no application or origination fees. They also offer co-signer release.

To learn more about each of these banks (as well as explore other options), check out this detailed synopsis.

Stick to the Golden Rule of Finances

To protect yourself from scammers and fraud, look out for all of these red flags and be alert to potential fraud situations. Always validate the company’s reputation. Never, ever sign anything without reading and completely understanding the terms and conditions.

Most importantly, always remember the golden rule of finances: If you see an offer that seems too good to be true, it probably is.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderRates (APR)Eligible Degrees 
Check out the testimonials and our in-depth reviews!
2.75% - 7.24%Undergrad
& Graduate
Visit SoFi
2.57% - 6.39%Undergrad
& Graduate
Visit Earnest
2.57% - 7.12%Undergrad
& Graduate
Visit CommonBond
2.99% - 6.99%Undergrad
& Graduate
Visit Laurel Road
2.58% - 7.26%Undergrad
& Graduate
Visit Lendkey
2.89% - 8.33%Undergrad
& Graduate
Visit Citizens
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.