If you are drowning in credit card debt or medical bills, you have likely seen ads for National Debt Relief. They promise to cut your debt significantly and help you become debt-free.
But is National Debt Relief legit, or is it too good to be true?
The short answer is yes, National Debt Relief is a legitimate company. They are not a scam. However, the process they use called debt settlement carries heavy financial risks that sales agents might not fully emphasize.
Here is everything you need to know before signing up.
What is National Debt Relief?
Founded in 2009, National Debt Relief is one of the largest debt settlement companies in the United States.
To prove their legitimacy, they maintain:
- An A+ rating with the Better Business Bureau (BBB).
- Accreditation with the American Association for Debt Resolution (AADR).
- Strict compliance with the Federal Trade Commission (FTC), meaning they cannot charge you upfront fees.
How Does the Program Actually Work?
National Debt Relief does not pay off your bills immediately. Instead, they negotiate with your creditors to let you pay back less than what you owe.
Here is the step-by-step process:
- Stop paying creditors: You stop making monthly payments to your credit card companies.
- Save in an escrow account: Instead of paying creditors, you deposit a single monthly payment into a dedicated savings account managed by National Debt Relief.
- Negotiation: Once that account builds up enough cash, National Debt Relief contacts your creditors and offers a lump-sum settlement to wipe out the debt.
- Graduation: The program typically takes 24 to 48 months to complete.
What are the costs?
National Debt Relief charges a fee of 15% to 25% of your total enrolled debt. Legally, they can only collect this fee after they successfully settle a debt and you approve the deal.
The Hidden Risks: What They Don’t Advertise
While the company is legitimate, the strategy of debt settlement can severely damage your financial health. You must weigh these three major risks:
1. Your Credit Score Will Plummet
Because you must stop paying your bills to force creditors to negotiate, your credit report will show missed payments month after month. Your credit score will drop significantly, making it very hard to get a mortgage, car loan, or new credit card for several years.
2. You Can Still Be Sued
Stopping your payments breaks your contract with your creditors. They do not have to negotiate with National Debt Relief. Instead, they can send your account to aggressive collection agencies or even sue you in court to garnish your wages.
3. You Might Face a Surprise Tax Bill
If National Debt Relief successfully negotiates a $10,000 credit card bill down to $5,000, the IRS views the forgiven $5,000 as taxable income. You may owe federal taxes on that “saved” money at the end of the year.
Safer Alternatives to Consider
Before destroying your credit rating with debt settlement, look into these options:
- Non-Profit Credit Counseling: Organizations like the NFCC can set up a Debt Management Plan (DMP). They lower your interest rates without hurting your credit score as severely.
- DIY Debt Settlement: You can call your credit card companies yourself and negotiate a lower payout, saving you from paying the 15% to 25% company fee.
- Chapter 7 Bankruptcy: If your debt is completely unmanageable, bankruptcy can wipe it clean in a few months, legally protecting you from lawsuits.
The Verdict: Should You Use It?
National Debt Relief is a legitimate business that has helped thousands of people resolve their debts. However, it should be treated as a last resort right before bankruptcy.
If you have a steady income and want to protect your credit score, look into non-profit credit counseling first. If you are already deeply behind on payments and face no other choice, National Debt Relief can provide a legitimate path out of debt, as long as you are prepared for the credit damage.
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