Debt settlement has become a big business as the number of credit card defaults continues to increase. Debt settlement companies prey on desperate consumers that are tired of harrassing phone calls and threatening letters. What debtors don’t realize is that they end up creating a whole new set of problems when they sign up for debt settlement instead of getting help from a reputable credit counseling organization.
Debt settlement companies are growing at an ever increasing rate due to the huge numbers of debtors that are falling behind on credit cards, loans and other bills. Many people have found that they can make much more money by providing debt settlement services for consumers than by actually helping them get back on track.
Debt settlement services generally cost a couple thousand dollars for a typical client. This is four to five times what you might pay for a debt management program through a nonprofit credit counseling agency.
In addition, debt settlement companies sit on your deposits, earning interest and investing your savings while you continue to rack up 28% interest charges and late fees on your debt. They charge you a huge setup fee and high monthly fees for this “service.”
In one of the biggest tragedies surrounding debt settlement companies, you are provided zero protection from legal action by your debt settlement company. If you are sued, you must represent yourself. This frequently happens, since debt settlement companies will automatically instruct you to stop paying your creditors.
It can be tempting to cut your monthly payment in half. However, understand that this figure is simply an arbitrary figure that debt settlement companies come up with. The truth is that there is no ideal monthly payment for a debt settlement arrangement, other than to maximize what you can send to pay down your debt. They take advantage of desperate clients that are looking for a lower monthly payment.
If you are still tempted by debt settlement companies, you might want to consider who you are trusting with your financial future. You might be surprised at the fraud and high volume of complaints registered against debt settlement companies. This review of debt settlement companies may make you think twice before contacting one of these companies!
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