Complete review of Freedom Debt Relief and how their program of debt settlement works

If you're struggling with debt and considering debt settlement, you probably have come across Freedom Debt Relief. They offer a program to negotiate with your creditors and settle your debt for less than you owe. We've spent years in the lending industry and we track dozens of different debt settlement companies. We wanna break down how Freedom Debt Relief works, what it costs, and how long it takes, so you can decide whether it's the best strategy for tackling your debt. The first question we should answer is whether Freedom Debt Relief is a legit company. The debt settlement industry has a lot of players and not all of them do things the right way. Freedom Debt Relief is one of the largest companies in the industry. They've been around for over 20 years and the company is one of the founding members of the American Association for Debt Resolution. That means that they adhere to certain standards in the way that they serve customers. Freedom Debt Relief is also one of the most transparent debt settlement companies out there. They also have a very robust FAQ section of their website, which I recommend spending time reading before you sign up. So how does Freedom Debt Relief help you resolve your debts? Well, before you even sign up for their program, you will have an in-depth conversation with one of their certified debt consultants. I don't think they are actually certified by anyone, but it is a fancier title than Sales Associate. They will pull your credit report, get a full picture of what you are paying, and walk through your options. Freedom Debt Relief claims that they will give you all of the debt resolution options available to you. They will present this process as though it were just a math question. But keep in mind that there will be a lot of assumptions about how the future will play out. Those assumptions will be key to understanding your best plan of action. Of course, it will be in their best interest to show you that debt settlement is the best thing for you. As part of this planning session, you will be able to decide which of your loans you want to enroll in the process. They will ultimately be paid on the total debt that you enroll, so they will encourage you to include everything that you can. But they will only negotiate unsecured debt, like signature loans, credit card balances, and medical bills. They will not include any secured debt, like auto loans or home equity loans. It's important to recognize that they will not work with you unless you enroll at least $7,500 in debt. Most of their clients will enroll debt that is at least $20,000. Once you determine the total debt you will enroll in the program, they will work with you to determine what you want your monthly payment to be. If you're buried in debt, it can be refreshing to think that you can suddenly decide how much of your monthly budget you put towards your debt. It might even seem like a cheat code that you get to decide your monthly payment. This short-term relief can have long-term implications though. We'll talk a little bit more about those implications later. Once you sign up, you stop making any of the monthly payments to the creditors you enrolled in the program. Instead, you will pay your new monthly payment into a separate account controlled by Freedom Debt Relief. You will fall behind on the payments for your enrolled debt. The creditors will report you to the credit bureaus when you're 30 days late, then 60 days late, then 90 days late, and finally when you default on the debt. The idea of debt settlement is that your creditors will eventually come to the conclusion that getting any money out of you is better than getting no money. So they will negotiate down the principle that you pay them. This is where those monthly payments that you were making become important. That's the money that Freedom Debt Relief will use to pay the settlement. There's also a possibility that the settlement will require you to make discounted monthly payments for a period of time. It's crucial that this time you stay current on those payments. If you don't, your agreement with the creditor is voided and you're back to owing the full amount and whatever interest has been incurred over the time period. You continue this process until you've settled your debt with all of your creditors. What does debt settlement cost you? The fee that you pay Freedom Debt Relief will come out of the account that you build up. When they settle a debt, they will earn between 15% and 20% of the total. That is not 15 to 20% of the amount that you settled for or even the amount that was discounted. This is a percentage of the total debt at the time you signed up. The actual percentage will depend on the amount of debt you enroll and the state in which you live. In addition to the settlement fee, you'll be charged $9.95 to set up the savings account and charged a monthly maintenance fee on that account of $9.95. If the debt settlement process works out, what results can you expect? Well, after you account for the debt settlement fee, people who complete the debt settlement process save an average of 32% on their debt and the process usually takes between two and four years. Now let's talk about some of the risks of the debt settlement process. Some of the risks are unavoidable and some of them are just possibilities. One unavoidable impact of doing debt settlement is that your credit score will be trashed. If your credit score is already in the poor or bad range, you may not worry much about that. But if you have fair or good credit, debt settlement will push your score into the low 500s, maybe even lower. This is a consequence of repeatedly missing payments. There is no way to avoid the impact that this will have on your credit score. Your credit score will not have a chance to rebound until the debt is settled. Then, even if you're diligent and lucky, it will take you at least 18 months to make meaningful improvement to your score. So once you sign the debt settlement agreement, you're locked into four to seven years of bad credit. The erosion of your credit score can actually eliminate your options. Right now, if you have fair credit or better, you have a good chance of qualifying for a debt consolidation loan. That could lower your monthly payment and put you on a definitive path to paying off your debt. But if you try out debt settlement first, you are less and less likely to qualify for a debt consolidation loan as month after month passes while you miss payments. Another risk is that you might not complete the process. Not all of the people that start with Freedom Debt Relief are able to see it through. The biggest reason for dropping out of the process is failing to make consistent monthly payments. Those payments are the key to the negotiation process. So if you aren't consistent in making them, the process breaks down or grinds to a halt. If that happens, you get all the negatives from debt settlement without any of the benefits. Even if you stick with it, there is no guarantee that your creditors will negotiate. Some creditors would prefer to play hardball, and it's not uncommon for them to sue you. If that happens, Freedom Debt Relief will engage an attorney to help negotiate a settlement. That's a great feature that not all debt settlement companies do. But, and I cannot stress this enough, that attorney will not represent you in court or file any motions for you. If negotiations fail, you will have to hire your own lawyer to represent you. If you don't, you will suffer a summary judgment that could create a lot more hardship for you over the long run. Even if everything goes smoothly, you need to be aware that the IRS considers forgiven debt income. That means that you will have to pay taxes on it. If a creditor forgives $4,000, you will pay taxes as though your income increased by $4,000, even if you had to pay Freedom Debt Relief 2,500 of that as a fee. After Freedom's fee and the IRS's share, you might find that you didn't save yourself all that much money compared to the trouble that it cost you. Freedom also has no control over how long the process will take. They might give you a ballpark estimate, but it will entirely depend on your creditors and your payments. You see, if you decide you want to drop your monthly payment a lot, you might feel better about the breathing room that it gives your finances, but it will mean taking much longer to amass the money that you need to negotiate your debts and pay Freedom's fees. A good rule of thumb on how long it will take to negotiate your first debt would be to take your lowest debt balance, multiply it by 75%, and then divide that amount by your Freedom Debt Relief monthly payment. That's the number of months that is likely to be the soonest you can resolve one of your debts. So is debt settlement a good idea for you? Well, only you can answer that question for yourself, but there are a few things to think about. If your debt problems are driven by secured debt, like auto loans and a mortgage, debt settlement won't be much help to you. Also, if you currently have a credit score in the mid 600s or better, you really should look into debt consolidation first. Consolidation loans can drop your monthly payment while accelerating your debt payoff. Of course, you only want to consolidate your debts if you can get an APR that's at least two to three percentage points lower than the interest rate of your current debt. If you want to check to see what rate you could get on debt consolidation, head on over to the Yukon Project. On our Marketplace page, you can select Debt Consolidation and then apply to any one of our featured lenders. Behind the scenes, we will check your rate with up to 40 other lenders. Our partners use a soft credit check, so applying won't hurt your credit score. We will show you all of your approved offers so you can decide whether debt consolidation can help you pay off your debts. If you find that debt consolidation won't work for you, our partners can also talk to you about debt settlement. The last thing I will say is that if you are seriously thinking of using Freedom Debt Relief, read reviews about them on Trustpilot or other third-party review sites. Don't just read the positive reviews either. See what it looks like when things go wrong. You should also look for reviews of people who have completed the process and not just reviews from people who liked their sales associate. That will give you a more complete picture of what you could be in for. If you have any direct experience with Freedom Debt Relief specifically or debt settlement in general, please leave a comment and tell us about it. We're trying to build a community of people who will pool their experience and share their insights so that we can all be better informed when we make decisions about our personal finances. If you found this information helpful, please like this video and subscribe to our channel. Your support is appreciated and it really helps us out. Thanks for watching.