Many Americans are feeling the bite from the economy. With many Americans unemployed and many losing unemployment benefits, debt is taking a back seat to daily survival. But for those who are slowly emerging from financial crisis, a debt settlement company may seem like the answer to their prayers. Since the beginning of the Recession, debt settlement companies have seen an increase in business, since most people can’t afford to pay off their debts in full. Unfortunately along with the reputable businesses come the scams.
Before you pay hundreds or thousands of dollars to a debt settlement company, here’s a few things you should know:
- You can do most of it yourself. What a debt settlement company does is call your creditors and request a reduced settlement. Since credit companies usually sell bad debts as a loss to a collection service, the chance to collect from the debtor is usually more profitable. To the creditor it doesn’t matter who negotiates the deal, as long as they get the money.
- Learn what the fees are, and when they’ll be paid. Some debt settlement companies take their fees out before they begin setting aside money to pay your debts. In this situation you’re paying before you receive their service. If they are unable to negotiate a reduction with your creditor’s you’ll be worse off then when you started. So while you’re giving them money every month, none of your debts are being paid. Read through all of the paperwork before you sign it and if it doesn’t seem right to you, don’t sign it.
- No matter what they say, don’t stop paying your bills. Some debt settlement companies will tell you to stop paying your bills. But, since they will not be negotiating a settlement until money is saved, this can be credit suicide. If you stop paying your bills fees, interest and penalties will still accumulate. You can still be taken to court for judgements and liens. Your property can still be seized. Unless there is an agreement with your creditor, if they’re telling you to stop paying your bills, look elsewhere for your debt services.
- Be wary of anyone who promises too much. A reputable debt settlement company will tell you that they cannot guarantee anything. The final decision lies in the hands of your creditors. They can show you their track record of successes and even say what has generally happened in the past, but they will tell you that they can’t guarantee anything. If the debt settlement company is guaranteeing a certain payoff before anything is negotiated, don’t use their service.
These are only a few things to consider when choosing a debt settlement company. As with any other matter pertaining to money, be sure to check the company out extensively. Look online for complaints and check the Better Business Bureau. Look at a few different companies before you decide and of course learn what happens to your money should you want to cancel. Rebuilding your credit will take time, so the time you spend in finding the right debt settlement company for you will be well spent.