Debt Settlement Debt Consolidation
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If you’re thinking in regards to using a debt consolidation or debt settlement service to support you get out of debt more immediate and save cash on your per month payments, make sure you do your homework before choosing a company. There are unquestionably shams and scams out there. First let me say that debt consolidation is *not* the same as debt settlement/negotiation, which most persons don’t realize. Debt settlement companies charge hundreds of dollars as an initial “admin fee” to set up your account, plus a on a monthly basis service fee. The fees vary depending on the company and the amount of your debts. Such companies take your cash each month, but don’t make on a monthly basis payments to your creditors! Instead, they put it in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there’s sufficient in your account to recompense a creditor in full. That may take *years* depending on the amount of debt you have with each creditor. Meanwhile, you may be sued by your creditors and your wages may be garnished! (Or just don’t make payments to your creditors. You’ll end up in the same spot without paying an individual to support you get there!) Settlement companies don’t ask your creditors to stop all interest, late fees and overlimit fees from accruing. That means while the negotiations are ongoing, your bills will carry on to grow! So if you’re sued and a judgement is brought versus you, you’ll owe more cash than before! And shoddy companies, which there are a lot of, don’t tell you *any* of this up front. I call it “getting permission by omission” because they plainly don’t tell you how their program works *before* you sign an agreement with them. Or after, for that matter. But if you ask the right questions, at last you’ll figure it out. (Or when the crap hits the fan. Whichever comes first.) Let me give you an example of how debt settlement works. Let’s say you have $20,000 in unsecured credit card debt. You owe $10,000 to one credit card company, $6,000 to another and $4,000 to a third. You agree to a 5 year plan where you recompense $250 a month to the settlement company. (After all, $250 a month for 60 months is only $15,000, so you’re saving $5,000 and you’ll be debt-free in 5 years, right?) The admin fee will cost you $750. Your introductory 3 on a monthly basis payments go towards that and not one thing gets put into your trust account until your 4th month. The settlement company keeps $50 of your $250 payment each month for the service fee. That means $200 a month is being added to your trust account. Most debt settlement companies assert to be competent to negotiate your debt for with regards to 50% of what you owe. So let’s use the lowest credit card debt as an example. If you owe $4,000 and your creditor agrees to receive $2,000 as payment in full, it will take 10 months at $200 per month to have sufficient in your trust account to recompense off just that one credit card. But remember, your introductory 3 payments to the settlement company only paid the admin fee. That means your initial credit card settlement is 14 months *after* you started sending them money. So what’s the problem? It’s simple. Your creditor won’t agree to receive half of your actual debt unless, or until, it may be remunerated in full. Otherwise, you’re expected to make your normal regularly every month payments. Since you don’t have $2,000 in your trust account, and you won’t have it until more than a year after you stopped paying your creditor directly, they’ll in all probability take you to court and request that your wages be garnished long before you have that $2,000 built up. And what in regards to your other creditors? Well, they’ll be waiting even longer to get their cash from the settlement company. The $6,000 debt will take 15 *more* months to remunerate off, assuming your creditor waits that long and agrees to 50%. And that $10,000 bill? You do the math. On the other hand, if you signed up for a 3 year plan with the settlement company, your debts would be paid off sooner. But, the question is, will your creditors wait that long? Probably not. The facts are, you may negotiate with your creditors yourself. Most will agree to take a littler per month payment from you and stop all interest and fees from accruing. And, of course, you’ll save thousands of dollars in fees to a settlement company. Before signing up for any service, please be sure you check out the company thoroughly. And don’t let the words “non-profit” fool you either. A lot of debt settlement companies assert to be non-profit. Going back to the example above, if you recompense them $15,000 over a 5 year time frame and they settle your debts at half of what you owed, they’ll make $5,000 from you. I’d call that a profit, peculiarly since they might not have in truth helped you in any way. Most companies will concede you to cancel your account and get a refund of what you’ve paid, less the non-refundable admin fee and the regularly every month service fees. If you feel you’ve been mislead with regards to their program, don’t hesitate to argue til the cows come home. File a complaint with the Better Business Bureau or hire an attorney if you feel you’re getting nowhere. You may visit the Better Business Bureau’s website (http://www.bbb.org) and find reports on hundreds of companies. Here’s a little listing of companies that have poor reputations with the BBB: National Consumer Debt Council LLC – Irvine, CA (A.K.A. NCDC, United Consumer Law Group) Financial Rescue Services – Burbank, CA Debt Legal Services – Anaheim, CA American Debt Relief – Los Angeles, CA (A.K.A. A M Debt, American Debts Relief, Debt Relief) Please be very cautious when choosing a debt aid company and ask lots of questions before agreeing to anything. If you find they’re evading your questions, run fast and run far. There are reputable companies out there, so keep looking until you find one. |
