Debt Settlement Companies - What They Don’t Tell You is Shocking
Saturday, July 18th, 2009 Subscribe To Our Feed
Considering contracting with a debt consolidation company or a debt settlement companby because you think that by hiring them you’ll get out of debt faster and save money on your monthly bills? If you are make sure to thoroughly research them before you sign a contract because there are an awful lot of scams out there and you can end up in worse shape than you are now.
Debt consolidation companies aren’t the same as debt settlement or debt negotiation companies.
What you might find surprising is that although a lot of credit debt settlement companies call themselves non-profit they will actually charge you an initial administration fee of hundreds of dollars just to set up your account. Then they’ll charge you a monthly service fee that’s based on the amount of money you owe. Does that sound like a non-profit company to you?
Let’s separate fact from fiction and look at what is supposed to happen:
A debt settlement company will pay your loans out of a trust account that they have set up. That’s true. It’s a fact. But you can run into a real problem with the amount of time it takes them to 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, when there’s enough money in the trust account, they will make a lump-sum settlement with your creditor.
Theoretically sounds okay. The reality is that it can take years to build up enough cash in your trust account to pay each of your creditors. What can happen in the meantime is your creditors can garnish your wages after suing you.
And while they’re negotiating, your debt will continue to grow because debt settlement companies do not make any arrangements with your creditors to stop late fees, over limit fees, or interest.
So you can end up being sued.
Then, if the judgement is against you, you’ll owe more money than you did before you hired the company.
And to pour salt into your wounds, most debt settlement companies don’t tell you any of this before you sign a contract with them.
So What Can You Do?
Either you can negotiate with your creditors yourself or you could work with a debt relief consolidation company. Negotiate for yourself and don’t be surprised if a lot of your creditors agree to take smaller monthly payments. And, they might even stop both your interest and your fees from piling up.
Go this route to get out of credit debt and you will not only save this money, you will also save whatever money you would have paid to a settlement company.
If you’ve already gotten involved with a settlement company and things are not working out to your satisfaction most of them will let you cancel your account and get a refund of what you’ve paid to them. However they will deduct their non-refundable monthly service fees along with their administration fees. That’s true for the “non-profit” companies also.
If you do decide to sign up with any service, be cautious. Ask questions. It they avoid answering your questions or if they give you the run around, move on to a different company. There are some legitimate debt settlement companies that actually do help people. But you might just have to sift through a number of them until you find one that you’re comfortable with.
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