What Debt Settlement Companies Don’t Tell You is Shocking

In Credit Repair of CreditGuru (July 24, 2009 5:08 am)

Giving some thought to contracting with one of the debt settlement companies or debt consolidation companies because you believe they will help you to save money on your monthly payments and get you out of debt faster? 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.

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. And, on top of that, they charge a monthly service fee that’s determined by the amount of money you owe. Doesn’t sound like non-profit to me.

Let’s take a look at what’s supposed to happen.

Debt settlement companies pay off your loans from a trust account that they’ve 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.

This is going to sound amazing, but even though you’re paying your debt settlement company every month, they’re not necessarily paying the people you owe money to every month.

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. In reality, years can go by before you have enough money in your trust account to pay every one of your creditors. In the meantime your creditors can sue you and they can garnish your wages.

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 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.

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?

You might want to negoitiat 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.

Try this in order to get out of credit debt and you’ll not only save money, you’ll also save the money you would’ve 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 also true for the “non-profit” companies.

If you do decide to sign up with any service, be cautious. Ask questions. If it seems like they’re avoiding your questions or like they’re giving you the run around, move on to another company. Keep in mind that there are legitimate debt settlement companies out there. You just might need to research a number of them before you find one that you’re comfortable with.

If you enjoyed this post, make sure you subscribe to my RSS feed!

1 Comment »

  1. Definitly look into any company before signing on with them. Ask questions and get it in writing. There are a ton of companies out there willing to help, don’t go with the first one, shop around.

    Comment by Jon's Debt News — July 26, 2009 @ 11:48 pm

RSS feed for comments on this post. TrackBack URI

Leave a comment