Debt Solution Source

Thinking about 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. Doesn’t sound like non-profit to me.

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. However, you can run into a problem with the time it takes before they make the 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.

Once they put your money into a trust account they begin negotiating with your creditors. Then, they’ll make a lump sum-settlement with your creditor.  However, it happens after there’s enough money in the account to pay the entire amount.

In theory this is okay. In reality, years can go by before you have enough money in your trust account to pay every one 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.

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?

Either you can negotiate with your creditors yourself or you could work with a debt relief consolidation company. Negotiate yourself and you will find that many creditors will agree to take a smaller monthly payment and might even stop your fees from piling up and might even stop your interest.

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. However they will deduct their non-refundable monthly service fees along with their administration fees. That’s true for the “non-profit” companies also.

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 reputable debt settlement companies out there. But you might just have to sift through a number of them until you find one that you’re comfortable with.

Financial Issues Explored

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