Are you thinking about contracting with a debt settlement company or a debt consolidation company to help you save money on your monthly payments and get out of debt quicker? If so, be sure to do a thorough job researching the company before you sign a contract with them. That’s because there are a huge number of scams out there, so you can even end up in worse shape than you are now.
Did you know that debt consolidation companies are not the same as debt negotiation companies or debt settlement companies?
And even though many credit debt settlement companies call themselves non-profit, they will charge you an initial administration fee of several hundred dollars just to set up your account. And to put the icing on the cake, they’ll proceed to charge you a monthly service fee that’s based on how much money you owe. Does that sound like a non-profit company to you?
What’s supposed to happen – separating fact from fiction:
A debt settlement company will pay your loans out of a trust account that they have set up. That’s a fact. The problem arises from the amount of time it takes before they make those payments.
What’s amazing is that even though you pay your debt settlement company money every month they aren’t necessarily making monthly payments to the people you owe money to.
They only begin to negotiate with your creditors after they put your money into a trust account. Then they will make a lump-sum settlement with your creditors. But that’s only after there’s enough money in the trust account.
This might sound good in theory. In reality, years can go by before you have enough money in your trust account to pay every one of your creditors. What may happen in the meantime is your creditors might sue you in order to have your wages garnished.
And while the negotiations are going on, your debt will increase because debt settlement companies don’t arrange to stop interest, late fees, or over limit fees with your creditors.
So what can happen is you may be sued.
If the judgement is against you you will end up owing more money than you did before you hired the company.
To make matters worse, many debt settlement companies will not tell you any of this before you sign an agreement with them.
What Can You Do?
As an alternative you can negotiate with your creditors yourself or consider working with a debt relief consolidation company. If you negotiate you will find that most of your creditors will agree to taking smaller monthly payments and perhaps even stopping all interest and fees from piling up.
If you do this to get out of credit debt, you’ll save the money you negotiated and also save the money you would have paid a settlement company.
But what happens if you’re already involved with a settlement company and you’re not happy with their performance? Most of them will let you cancel your account and give you a refund for what you’ve already paid them. But they will take out their non-refundable administration fees and monthly service fees. That’s also true for the “non-profit” companies.
So, if you sign up with any service, be cautious and ask questions first. If it seems like they’re avoiding your questions or like they’re giving you the run around, move on to another company. There are some legitimate debt settlement companies that actually do help people. You just might need to research a number of them before you find one that you’re comfortable with.