The Debt Settle Blog

If you’re thinking about using a debt consolidation service debt settlement or to help get out of debt faster and save money on your monthly payments, make sure to do your homework before choosing a company. Definitely there are frauds and scams out there.

First let me say that debt consolidation has not the same as negotiating the settlement of the debt that most people do not realize.

Business debt settlement charge hundreds of dollars as a down payment “admin” to configure your account, plus a monthly service fee. Rates vary depending on the company and the amount of their debts.

These companies take your money every month, but not make monthly payments to your creditors! Instead, they put in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there is enough money in your account to pay a creditor in full.

That can take * years * depending on the amount of debt to each creditor. Meanwhile, you can be sued by its creditors and wages can be garnished? (Or not making payments to your creditors. Will end in the same place without having to pay someone to help you get there!)

Settlement companies do not ask your creditors to stop all interest, fees and overlimit fees from accruing. That means that while negotiations are ongoing, their accounts will continue to grow! So if you’re sued and a verdict against you, you owe more money than before!

And shoddy companies, which are a lot of, do not tell you * any * of this up front. I call it “getting permission by omission” because they simply do not tell us how their program works * before * you sign an agreement with them. Or after, for that matter. But if the right questions, eventually you find out. (Or when the shit hits the fan. What comes first).

Let me give an example of how the debt settlement.

Say you have $ 20,000 in credit card debt unsecured. You need $ 10,000 to a credit card company, $ 6,000 and another $ 4,000 to a third party. You agree to a 5 year plan where you pay $ 250 a month to the settlement company. (After all, $ 250 a month for 60 months is only $ 15,000, so you’re saving $ 5,000 and be debt free in 5 years, right?)

The administration fee will cost $ 750. The first 3 monthly payments that go to and nothing is put in his trust account until the 4th month.

The settlement company keeps $ 50 of your payment of $ 250 each month for the service fee. That means $ 200 a month has been added to your escrow account.

Most companies’ debt claims to be able to negotiate its debt by approximately 50% of what you owe. So let’s use more credit card debt as an example.

If you owe $ 4,000 and your creditor agrees to receive $ 2000 as payment in full, it will take 10 months at $ 200 per month to have enough in your escrow account to pay only a credit card.

But remember, the first 3 payments to the settlement company only paid the administration fee. This means that your first credit card settlement is 14 months * after * they began sending money.

So what’s the problem? It’s simple. Your creditors will not agree to accept half its actual debt unless, or until they can be paid in full. Otherwise, you are expected to make their normal monthly payments.

Since you do not have $ 2,000 in your trust account, and will not until more than a year after he stopped paying your creditor directly, they’ll probably take to court and ask that their wages be garnished long before $ 2,000 that have accumulated.

What about your other creditors? Well, we’ll be waiting longer to receive their money from the settlement company. The $ 6,000 debt will take 15 * more * months to pay, assuming your creditor expects long and agrees to 50%. And that $ 10,000 bill? Do the math.

Moreover, when you subscribe to a plan of 3 years with the company agreement, their debts would be paid faster. But the question is, will your creditors wait that long? Probably not.

The facts are, you can negotiate with your creditors yourself. Most would agree to take a small monthly payment from you and stop all interest and fees from accruing. And, of course, will save thousands of dollars in fees to a company in liquidation.

Before signing up for any service, please make sure you check out the company thoroughly. And do not let the word “profit” fool you. A lot of debt settlement companies claim to be nonprofit.

Returning to the example above, if you pay $ 15,000 in a frame of 5 years time and they settle your debts at half of what was, will the $ 5,000 you. I would call it a benefit, especially because they might not have helped in some way.

Most companies will allow you to cancel your account and get a refund of what you paid, less the non-refundable administration fee and monthly service charges. If you feel you have been misled about its program, do not hesitate to argue til the cows come home. File a complaint with the Better Business Bureau or hire an attorney if you feel you are getting nowhere.

The Truth About Debt Consolidation

There is an undeniable appeal for debt consolidation. For those who are desperate to lower their energy bills, strengthen their performance and away from debt, it seems the best option available. And why not? The companies promise to fight for you, the promise of obtaining the best possible rates, the promise to make sure that you are their only priority. They pull all kinds of offers, benefits and temptations to you, and each seems better than the last. You can not expect to sign your name on the bottom line, because it means finally be free of problems.

Unless this is not how it actually works. Debt consolidation is the perfect answer to a question of funding. Yes, it has its values, and, yes, you can help. But if you’re not careful, you can easily find yourself paying more than you can afford. How? Because you are in debt to begin with.

The creditors are looking at your profile and thought one thing: “We will be sure to get our money.” And they do offer extremely high interest rates on your monthly payment low otherwise. You will make a smaller sum to help “consolidate” their debt. At first glance, is believed to have saved the stress and agony, while managing to work within a reasonable budget.

But that small amount will quickly grow to something strange and frightening, thanks to the consolidation of debt and its need to tack on interest. You can pay more than twenty percent in some cases. Add to that an extra ten percent for the needs of the business and suddenly you will be even more in debt … because you can not pay their fees supposedly better.

We are not suggesting that debt consolidation may not help. Can. But there are many ways for you to make mistakes with it that we urge you to fully understand before attempting service. Look at all the options, see if you can eliminate the debt on their own. If that’s possible, do it. If not, be very, very careful. According to naught unless all aspects are explained. Try to negotiate the best deal for you. Do not be afraid to check out the different companies.

Debt consolidation is a wonderful theory and practice sometimes wonderful. It, like everything else, requires you to be patient, wise and well informed. Applying these characteristics and will see results.