If you have a large amount of outstanding debt without the ability to repay, your creditor may consider forgiving a portion of your debt in exchange for a lump sum payment. This process is called debt settlement.
And if you’d rather leave the negotiating to someone else, you may consider enlisting the help of a debt settlement company, with Freedom Debt Relief being the largest company in that industry. While these companies can sometimes help consumers clear their debts, they also tend to charge high fees and are often scrutinized by regulating agencies like the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC).
Debt settlement can also leave a scar on your credit report, and could take anywhere from 24 - 48 months . Any amount forgiven is usually taxed by the IRS as income. If you are struggling with your debt and need help, you may consider working with an accredited credit counseling agency first.
Freedom Debt Relief review
Summary of debt settlement services
When you work with a debt settlement company like Freedom Debt Relief, the company is attempting to settle the debt on your behalf. You’ll be asked to stop making payments on your debt, as delinquent accounts are more often successful in settlement negotiations. (Note, however, that doing so could cause you to lose points on your credit score, due to late and missed payments.)
You’ll then put money into a bank account that Freedom Debt Relief can access. Each one of your monthly payments in this account will be saved until Freedom Debt Relief has enough to make a "reasonable offer" to your creditor. For credit cards, this can be somewhere around 50% of your total debt.
Freedom Debt Relief charges fees once your debt is settled. The amount you’ll pay is typically around 15 - 25% of total settled debt of the total settled debt.
Who’s the best fit for Freedom Debt Relief?
You must have at least $7,500 of outstanding unsecured debt to work with Freedom Debt Relief. Unsecured debts are not backed by collateral, and some common types include credit card balances, traditional personal loans and medical bills. Freedom Debt Relief does not offer debt settlement for secured debts, such as car loans or mortgages.
If you’re unable to make payments or are suffering from hardship while carrying more than $7,500 of unsecured debt and your credit is damaged, Freedom Debt Relief may be a last resort worth considering, as it’s received a 4.7/5 star rating from LendingTree reviewers.
Heavily weigh the risks of these kinds of services, however. For example, while you’re saving up for your settlement via monthly payments, you’ll be allowing your account to go delinquent, which shows up on your credit report. According to Freedom Debt Relief, while its customers’ median score does see a hit in the first six months, the scores almost completely recover after 45 months. Following their "graduation" from the debt settlement program (once all enrolled debts have been settled), Freedom claims that around a quarter of customers have a median credit score of 680-plus, rising to almost 50% after about two years past "graduation."
Some creditors may seek legal action for repayment rather than settling, too. Freedom Debt Relief claims they offer free legal support for these types of situations, but you'll likely end up responsible for any court fees and adjacent costs you might incur.
Freedom Debt Relief Debt Settlement Pros and Cons
|Could pay off your debt for less||No guarantee that debt can be settled or lowered|
|Will work with multiple debts||Creditors may choose to take you to court rather than settle the debt|
|Settlement fees are high, but relative to the competition||You are likely to owe taxes on any forgiven amount of debt|
Signing up with Freedom Debt Relief
- Schedule a consultation: Before signing up, you’ll have a phone call with one of Freedom Debt Relief’s certified debt consultants, reviewing your finances and assessing possible solutions.
- Review a repayment plan: If you decide to move forward with the debt settlement program, Freedom Debt Relief will help you create a tailored debt repayment plan.
- Stop making payments: You’ll be asked to cease payments on your debt. Instead, you’ll make regular payments to a dedicated account that Freedom Debt Relief can access.
- Await negotiations: Once your account has sufficient funds to present the creditor with a "reasonable offer," Freedom Debt Relief will start the debt negotiation process with your creditors. Freedom Debt Relief says this usually happens for the first debt around the fourth to sixth month of the program, but this can vary.
- Approve the settlement: If Freedom Debt Relief reaches an agreement with your creditors, you’ll be asked to approve the settlement amount.
- Pay off the debt: If you approve the settlement amount, the funds from your dedicated account will be transferred to the creditor as payment for your debt. Freedom Debt Relief will also pull its fees from this account.
- Rinse and repeat: This process will repeat until all debt balances are cleared. Freedom Debt Relief says the process typically takes 24 - 48 months , though individual time frames may vary depending on how many debts you’re trying to pay off.
Freedom Debt Relief terms and fees
Freedom Debt Relief says it does not charge an upfront fee for debt settlement, though it has settled a lawsuit with the CFPB for allegedly doing so in the past. It does charge a fee of between 15 - 25% of your total settled debt, with the amount varying depending on your state of residence.
For example, if you had of outstanding debt and Freedom Debt Relief was able to settle $4,000 of debt, you would likely owe between $600 and $1,000 for this service. The company takes its fees into account when determining what your monthly payments are when you first sign up — so this amount will simply be taken out of the dedicated account you initially set up.
|Debt amount required||$7,500 minimum|
|Fees||15 - 25% of total settled debt|
|Time frame||24 - 48 months|
How does Freedom Debt Relief compare to other services?
In comparison to other debt relief companies, Freedom Debt Relief’s fees are pretty standard. However, working with a debt settlement company is not your only option. In fact, you may wish to avoid it altogether, as the industry as a whole is widely viewed negatively.
Here are some of the services you may want to seek out instead:
- Credit and debt counseling: Counseling services help you develop a tailored debt management plan to reach financial security. The National Foundation for Credit Counseling (NFCC) and Financial Counseling Association of America (FCAA) can help you find accredited counseling agencies.
- Debt consolidation: When you consolidate your debt, you roll multiple balances into one monthly payment using a new loan or line of credit. Consolidating your debt can lower your monthly payments and reduce the amount of interest you owe.
- Bankruptcy counseling: If you’re unable to pay your creditors, another option is to file for bankruptcy. A lawyer will need to accompany you through this process, and in some cases you'll be required to seek counseling services from an agency approved by the U.S. Department of Justice.
Explore all of your options before making a decision. You may discover there are other ways to get help and clear your debt for a fraction of the cost of debt settlement.
Freedom Debt Relief vs. GreenPath Financial Wellness
GreenPath Financial Wellness is an NFCC-accredited nonprofit. GreenPath offers debt management plans, which are different from the debt repayment program offered by Freedom Debt Relief. With GreenPath’s debt management plan, you’ll make payments into a dedicated bank account. GreenPath will then use those funds to make payments to your creditors on your behalf, while negotiating for lower interest rates and to have fees you’ve accumulated waived or reduced. The service can even stop collection calls.
A debt management plan will take longer than a debt settlement plan, as you can expect to repay your total debt over three to five years. There may be fees, as well: GreenPath charges up to $50 to set up a debt management plan and then charges up to $75 per month in additional fees, though some clients can end up paying as little as $0.
The exact amount you pay in fees will depend on your financial situation, the amount of debt you have and the state you live in. Even the highest fees at GreenPath can be much cheaper than the services offered by Freedom Debt Relief. Plus, GreenPath also makes other counseling services available for student loans, housing, bankruptcy and more — something you won’t find at Freedom Debt Relief.
Freedom Debt Relief vs. National Debt Relief
Like Freedom Debt Relief, National Debt Relief is a debt settlement company, and its debt relief program is also focused on unsecured debts. Similarly, you must owe more than $7,500 to pursue debt settlement through National Debt Relief’s program. National Debt Relief charges a fee of 15 - 25% of the amount of the enrolled debt, which is identical to Freedom Debt Relief’s fees.
In addition to its debt relief program for settlements, National Debt Relief can connect you with debt consolidation loans as an entirely separate product. Debt consolidation loans don't involve debt settlement, and you’ll still need to repay all of the money you owe. These types of loans are not offered by Freedom Debt Relief.
Remember that you may want to seek free or low-cost help from an accredited credit counseling agency before enlisting the services of any debt settlement company.