Freedom Debt Relief vs. National Debt Relief (2024 Guide)
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Summary:
Debt settlement companies offer solutions to unmanageable debt with the aim to help you avoid bankruptcy. In this article, we examine two such companies — Freedom Debt Relief and National Debt Relief — to shed light on how they operate and help you choose the most suitable option for your financial circumstances.
If you’re overwhelmed by debt, such as credit card and medical bills, you may be looking for a way to get out from under that debt. One option is to enlist the help of a reputable debt relief company.
National Debt Relief and Freedom Debt Relief are two firms that can help you achieve your financial goal of becoming debt-free. In this article, we compare these two debt relief companies to help you find the best solution for your needs. Let’s start by looking at what debt relief actually means.
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What is debt relief?
Debt relief, also known as debt resolution, is a way for consumers to pay off their debts using a third-party firm. One of the key roles of these services is to negotiate with your creditors so you don’t have to, explains Larry Zhong, a personal finance expert and founder of YieldAlley.com.
It’s important to note that debt relief firms do not handle all types of debt: they won’t negotiate secured debts, such as mortgage debt or vehicle loans, and they cannot assist in reducing federal student loan debt. That said, the following are types of debt that debt relief companies can help you relieve:
- Credit card debt
- Personal loans
- Lines of credit
- Medical bills
- Collections
- Certain business debts
- Some private student loans
Keep in mind that not every debtor is eligible for debt relief. For example, both Freedom Debt Relief and National Debt Relief require you to have a minimum of $7,500 in debt to qualify for the program. In addition, you can no longer use your credit cards and will need to stop making payments (if you haven’t already). This is an important point to consider because even if you’re living paycheck to paycheck, you could still be in good standing with your creditors.
“Debt resolution is not a panacea for someone who is carrying debt,” says Sean Fox, President of Debt Resolution at Achieve. “It’s best for someone who is struggling with making their minimum payments on unsecured debts, generally as a result of dealing with some type of financial hardship (such as divorce, a loved one’s death, the loss of a job, or unexpected major medical expenses) that make it difficult to have any extra income to put toward debt repayment.”
The bottom line is that the services of debt relief companies are not meant for everyone who is in debt. Instead, they are designed for people who can’t manage their existing debts (or who have already defaulted) and want to avoid bankruptcy. In many cases, a debt management plan may be a better solution, so it’s important to assess your financial situation before reaching out to a debt relief company.
Freedom Debt Relief vs. National Debt Relief
Debt settlement companies help individuals struggling with overwhelming debt by negotiating reduced payments with creditors. The following are insights into the services and benefits of two players in this field, National Debt Relief and Freedom Debt Relief:
National Debt Relief
National Debt Relief focuses on negotiating debt settlements for clients, charging a fee ranging from 15% to 25% of the enrolled debt amount. Clients only pay upon successful debt resolution.
Highlights of National Debt Relief include the following:
- Free consultation to assess eligibility
- Professional negotiation with creditors
- Monthly deposits into a dedicated savings account
- Resolution typically within 24 to 48 months
As mentioned previously, while effective for unsecured debts, National Debt Relief does not handle secured loans, such as mortgages or auto loans. In addition, you must have debts totaling $7,500 or more to qualify for debt relief, and even then, National Debt Relief is not available in all states.
Freedom Debt Relief
Operating on a similar model, Freedom Debt Relief offers the following debt negotiation services on your behalf:
- Free consultation with a certified debt consultant
- Negotiation with creditors on behalf of clients
- Monthly deposits into a controlled savings account
- Resolution upon accumulating sufficient funds
Like National Debt Relief, Freedom Debt Relief does not assist with secured loans, but they can manage private student loan debt. You must also have a minimum of $7,500 in debt, but you won’t be charged until after you authorize the settlement.
Pro Tip
“As with any business, a debt resolution firm charges a fee for its services. This is generally a percent of the debt enrolled or a percent of the debt the firm has reduced. These fees must be charged ONLY after the firm has successfully negotiated the debt to comply with regulations established by the FTC. If the company is not clear and upfront about this policy, consider it a major red flag and move on.” — Sean Fox, Achieve
Pros and cons of debt relief
It’s important to fully understand the implications of debt relief before deciding if this method of resolving unsecured debt is right for you. Depending on your situation, an alternative strategy may be a smarter move.
Alternatives to debt relief
If you’re considering resolving your debts through a debt relief company, make sure to explore alternative strategies before deciding if this type of debt resolution is the right choice for you. The following are some alternatives to debt relief worth considering:
DIY
With a little discipline, you can set up a budget for yourself and commit to paying down your debts on your own. This may involve cutting your spending or getting a side gig, but this is the way to go if you can manage it, says Fox.
Debt consolidation loans
Another option is to get a debt consolidation loan, which has far less impact on your credit scores. A consolidation loan allows you to combine all of your debts under one loan, which should give you a lower monthly payment. It’s also much easier to manage one debt as opposed to several. However, a good credit score is required to qualify for a consolidation loan, which could put this option out of reach for some consumers.
Credit counseling
Visiting a credit counseling agency is a good low-cost (or no-cost) option if you think you can manage your debts on your own but need some guidance. An experienced credit counselor can help you assess your finances, set up a budget, and find a debt management plan that works for you.
FAQ
Can I trust Freedom Debt Relief and National Debt Relief?
Yes. Both Freedom Debt Relief and National Debt Relief are accredited by the American Fair Credit Council (AFCC) and the International Association of Professional Debt Arbitrators (IAPDA). Both companies have been operating since the early 2000s and do not charge any upfront fees.
What is the difference between debt relief and debt consolidation?
Debt relief involves negotiating reduced payments with creditors, which can hurt your credit scores. Debt consolidation, on the other hand, entails combining debts into a single loan, which should have a lesser effect on your scores and improve your credit history going forward.
Does debt relief affect my credit?
Debt relief may negatively affect your credit scores, especially with settled debts reported as such. However, once you do resolve your unsecured debts through debt relief, you should see your score improve as you learn to manage debt more efficiently.
Key takeaways
- Debt relief involves using a third party to negotiate debts on your behalf.
- Debt relief companies only handle unsecured debts, such as credit card debt and medical bills.
- National Debt Relief and Freedom Debt Relief each offer effective debt settlement solutions.
- Both companies have accreditation and positive customer ratings, and they each offer a free consultation to assess your situation.
- Debt relief may impact your credit scores, but it’s a more favorable alternative to bankruptcy.
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