If you’re feeling overwhelmed by debt, offers of debt relief might seem as enticing as a cold glass of water in the desert.
Freedom Debt Relief is a company that offers debt settlement services to help people get rid of their debt faster — for a fee. In this Freedom Debt Relief review, you’ll learn about the services the company offers, other factors to consider, and an alternative option.
Freedom Debt Relief review: The basics
Freedom Debt Relief offers debt settlement services, also known as debt relief or debt negotiation, to its customers. To qualify, you must owe at least $7,500 in unsecured debt, such as credit card debt, personal loans, or medical bills.
You can start with a free debt evaluation, where you’ll talk with a consultant about different debt repayment strategies and determine if debt settlement is right for you.
If you’re a good fit for the program, Freedom Debt Relief offers to negotiate with your creditors to reduce the amount you owe.
You’ll set up a Dedicated Account and a payment schedule with Freedom Debt Relief. Once you’ve paid enough into the account, the company will start negotiating with your lenders.
According to the company’s website, the process typically takes between 24 and 60 months, depending on how much you pay into your Dedicated Account. It also says you can save between 15% and 35%, but there are no guarantees.
If Freedom Debt Relief reaches a settlement with one of your creditors, it will reach out to you for authorization before proceeding.
Keep in mind that you need to continue making payments to your creditors throughout the process in addition to paying into your Dedicated Account with Freedom Debt Relief.
So, if you’re already struggling to get by, you could fall behind on your payments, which could hurt your credit score. It’s essential that you’re open about your budget during the initial consultation so you don’t get in over your head.
Fees for the program range from 15% to 25% of your enrolled debt, with an average of 21.5%.
Freedom Debt Relief review: Lawsuits and responses
Freedom Debt Relief positions itself as the leader in debt negotiation, resolving over $8 billion in debt. But over the years, the company has been the target of lawsuits claiming it takes customers’ money without providing promised results.
State lawsuits filed against Freedom Debt Relief
In 2009, the district attorney’s office in San Mateo, California, where the company is headquartered, filed a suit claiming several infractions, including the following:
- The company didn’t attempt to contact all the creditors of each customer to initiate a settlement negotiation.
- The company told customers it was settling their debt accounts. Months later, customers found out the accounts had been sent to collections or creditors had filed lawsuits against customers.
- The company rebuffed customers when they asked about the status of their settlements.
- Some customers were denied the money-back guarantee the company offered.
That same year, Washington state residents filed a class-action lawsuit against the company, claiming it charged fees above the state’s maximum and didn’t inform customers that the process might ruin their credit.
The company has settled lawsuits in Colorado, Delaware, New York, and Rhode Island as well.
A company spokesperson pointed out that regulations have changed since these lawsuits and that the debt relief industry and Freedom Debt Relief have made positive changes.
Federal lawsuit filed against Freedom Debt Relief
In November 2017, the Consumer Financial Protection Bureau (CFPB) filed a federal lawsuit against Freedom Debt Relief. In the filing, the CFPB accused the company of the following:
- Charging customers without settling their debt as promised
- Making customers do their own settlement negotiations
- Misleading customers about fees and the scope of its services
- Failing to inform customers of their rights to funds they deposited with the company
In an official response to the lawsuit, Freedom Debt Relief stated that the CFPB “fundamentally misunderstands” the debt settlement process and maintained that its practices are both compliant and ethical.
Is debt settlement right for you?
Freedom Debt Relief and similar companies can help you settle your credit card and loan balances for less than what you owe. But the service isn’t right for everyone.
The biggest drawback we see is that there’s no guarantee your debt will be settled, and that problem isn’t unique to Freedom Debt Relief. So, in some situations, you might pay fees without seeing the benefits you anticipated.
Also, if your creditors do forgive a portion of your debt, that amount could be considered taxable income. If you can afford the tax bill, that might not be an issue, but it’s important to plan for it.
Freedom Debt Relief review: Also consider these alternatives
If you’re neck-deep in debt, Freedom Debt Relief’s services are one option. But before you sign up, consider your other options as well.
For instance, see if you’re eligible to work with a certified credit counselor through the National Foundation for Credit Counseling. Certified agencies are largely funded through voluntary contributions from creditors and local grants, so they often charge little or nothing.
Also look into consolidating your debt with a debt consolidation loan. Just keep in mind that you’ll generally need good credit or a cosigner with good credit to get approved.
There’s no single best way to tackle your debt, so take the time to research your options, consider what you can qualify for, and make sure the benefits outweigh the costs. The important thing is that you continue taking steps toward eliminating your debt once and for all.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|