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Fees for Debt Settlement Programs

April 13, 2011

debt settlement feesAfter making the decision to get out of debt by enrolling in a debt settlement program, most consumers are concerned about fees. There are certain fees associated with these programs. Also, different companies will charge clients differently, which is why it’s important to know what to expect.

How Do Debt Settlement Companies Charge Customers?

There are a few different ways that debt settlement companies charge their customers. Some settlement agencies require customers to pay a flat fee per settlement. This size of this fee is usually determined by the amount a consumer owes. Most companies will usually charge around 15% to 18% of the total debt. Some consumers prefer this fee structure, as it lets them know exactly what they can expect to pay.

Other companies will charge customers a percentage of their savings. In some cases, customers may be charged around 25% to 30% of what they save. If the company were to settle a $10,000 debt for $5,000, they would charge the customer around $1,250 to $1,500, which would be due once that specific debt is settled. These companies usually also charge an initial set up fee and a monthly maintenance or service charge.

Some consumers believe that it is more beneficial to be charged according to the amount they save. This is because the more a company saves a consumer, the more money they will make. This ends up benefiting both involved parties.

The problem with the second fee structure is that consumers generally end up paying more than when charged a flat fee. When paying an initial set-up fee, a monthly service fee, and a percentage of the settlement, costs can quickly add up. On the other hand, when being charged a flat fee per debt, consumers will have begun paying before their debt is even settled. If they drop out of the program, they will end up losing that money.

There are advantages and disadvantages to both fee structures. When choosing a debt settlement company, its important for consumers to ask about all required fees and determine whether the program is the most cost effective choice for them.

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