Credit Card Debt Blog

If you're thinking about using a debt consolidation or debt settlement service to assist you get out of debt faster and salvage money on your monthly payments, make certain you do your homework before choosing a company. There are definitely fakes and cozenages out there.

First allow me state that debt consolidation is *not* the same as debt settlement/negotiation, which most people don't realize.

Debt settlement companies charge 100s of dollars as an initial "admin fee" to put up your account, plus a monthly service fee. The fees change depending on the company and the amount of your debts.

Such companies take your money every month, but don't do monthly payments to your creditors! Instead, they set it in a trust account, negociate your debts with your creditors, then do a lump-sum payment when there's enough in your account to pay a creditor in full.

That tin take *years* depending on the amount of debt you have got with each creditor. Meanwhile, you can be sued by your creditors and your wages can be garnished! (Or just don't do payments to your creditors. You'll halt up in the same topographic point without paying person to assist you get there!)

Settlement companies don't inquire your creditors to stop all interest, late fees and overlimit fees from accruing. That agency while the dialogues are ongoing, your measures will go on to grow! So if you're sued and a judgement is brought against you, you'll owe more than money than before!

And cheapjack companies, which there are alot of, don't state you *any* of this up front. I name it "getting permission by ommission" because they simply don't state you how their programme plant *before* you subscribe an understanding with them. Or after, for that matter. But if you inquire the right questions, eventually you'll calculate it out. (Or when the dirt hits the fan. Whichever come ups first.)

Let me give you an illustration of how debt settlement works.

Let's say you have got $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 hold to a 5 twelvemonth program where you pay $250 a calendar month to the settlement company. (After all, $250 a calendar month for 60 calendar 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 first 3 monthly payments travel towards that and nil gets set into your trust account until your 4th month.

The settlement company maintains $50 of your $250 payment each calendar calendar month for the service fee. That agency $200 a calendar month is being added to your trust account.

Most debt settlement companies claim to be able to negociate your debt for about 50% of what you owe. So let's utilize the lowest credit card debt as an example.

If you owe $4,000 and your creditor holds to accept $2,000 as payment in full, it will take 10 calendar months at $200 per calendar month to have got adequate in your trust account to pay off just that one credit card.

But remember, your first 3 payments to the settlement company only paid the admin fee. That agency your first credit card settlement is 14 calendar months *after* you started sending them money.

So what's the problem? It's simple. Your creditor won't hold to accept half of your existent debt unless, or until, it can be paid in full. Otherwise, you're expected to make your normal monthly payments.

Since you don't have got got got $2,000 in your trust account, and you won't have it until more than than a twelvemonth after you stopped paying your creditor directly, they'll probably take you to tribunal and petition that your wages be garnished long before you have that $2,000 built up.

And what about your other creditors? Well, they'll be waiting even longer to get their money from the settlement company. The $6,000 debt will take 15 *more* calendar months to pay off, assuming your creditor waits that long and holds to 50%. And that $10,000 bill? You make the math.

On the other hand, if you signed up for a 3 twelvemonth program with the settlement company, your debts would be paid off sooner. But, the inquiry is, will your creditors wait that long? Probably not.

The facts are, you can negociate with your creditors yourself. Most will hold to take a smaller monthly payment from you and halt all interest and fees from accruing. And, of course, you'll salvage thousands of dollars in fees to a settlement company.

Before sign language up for any service, delight be certain you check out the company thoroughly. And don't allow the words "non-profit" cockamamie you either. Alot of debt settlement companies claim to be non-profit.

Going back to the illustration above, if you pay them $15,000 over a 5 twelvemonth clip framework and they settle down your debts at one-half of what you owed, they'll do $5,000 from you. I'd name that a profit, especially since they might not have got actually helped you in any way.

Most companies will allow you to call off your account and get a refund of what you've paid, less the non-refundable admin fee and the monthly service fees. If you experience you've been mislead about their program, don't waver to reason til the cattle come up home. File a ailment with the Better Business Agency or engage an attorney if you experience you're getting nowhere.

You can see the Better Business Bureau's website (http://www.bbb.org) and happen reports on 100s of companies. Here's a small listing of companies that have got poor reputes with the BBB:

National Consumer Debt Council LLC - Irvine, calcium (A.K.A. NCDC, United Consumer Law Group)

Financial Rescue Services - Burbank, CA

Debt Legal Services - Anaheim, CA

American Debt Relief - Los Angeles, calcium (A.K.A. Type A Meter Debt, American Debts Relief, Debt Relief)

Please be very cautious when choosing a debt aid company and inquire tons of inquiries before agreeing to anything. If you happen they're evading your questions, tally fast and tally far. There are reputable companies out there, so maintain looking until you happen one.