A Debt Free Offer Can Make Situation Even Worse


Facing a huge amount of debt and struggling to make an arrangement. For paying the monthly bills can be overwhelming and stressful. In such times, when you get an offer from a seemingly kind looking debt relief company. Make your debt-free in a couple of months by paying only a meager amount of the total outstanding balance. It may seem like a boon and give you a sigh of relief.

However, if you are not cautious in your approach then this relief can become your pain. Soon the situation will be much worse than before. Typically, the debt settlement firms are on the lookout for such struggling consumers to whom they can sell their plans and programs. However, in the end, these struggling borrowers can often found to face:

  • High fees
  • Damaged credit
  • A tax bill and sometimes with
  • A higher amount of debt than they started with.

Ideally, the financing system is full of risks and a fair amount of unfair game. Companies that collect credit reports powers the entire system. Borrowing histories of the consumers create them. These credit reporting companies typically sell their data to different financial institutions that offer loans.

This sounds good somewhat. But as the consumer debt figure has risen considerably there is another type of offer that is being made to tens of millions of borrowers. All these offers are typically made based on the credit report makes all these offers.

Therefore, whenever you come across ads that claim to make your debt-free in as little as 24 months, consider these to be too good to be true. 

Listen to the regulators

Ideally, most of the debt relief for-profit companies thrive on consumers who are heavily indebted. It is very easy for them to attract them towards their services. By promising to help them get out of the debt situation. While most of these companies really do so, there are a few that will not keep their promise and not live up to your expectations.

It is therefore essential that you listen to the regulators who say consumers should be wary about the loans they take outright at the outset. They must know the:

This will help them to know whether or not taking out that particular loan is their cup of tea and they will be able to repay their creditors without defaulting. Otherwise, you will end up in debt and damaging your credit score and future borrowing power.

They also warn consumers about choosing the right option. When they fall behind their payments and suggest that the only real alternative to several of such consumers to Pennsylvania debt consolidation or debt settlement is bankruptcy. It has even more serious consequences.

Selling debt relief

The credit report prepared by the companies with information from the lenders. It is also used to sell different debt relief services by different companies. This information reaches to the credit reporting agencies through different sources. Specific process and cycle pass information such as:

  • The banks and other lenders who send information on the debts of consumers to the credit reporting company
  • The credit reporting company sells the lists of consumers who seem to be getting deeper into debt to the loan brokers and
  • The loan brokers mail these indebted consumers with an offer for a consolidation loan at a low-interest rate.

The indebted consumers who call the loan brokers are typically refused for a loan. If they are offered with anything that is a debt relief program offered usually by an affiliated debt settlement firm. These programs typically involve high fees, often leads to damaged credit and unanticipated tax bills, making the situation even worse.

Statistics to prove

As per records, consumer debt hit a record $4.02 trillion this year and this is not counting the mortgages. Moreover, this figure is after lots of borrowers aggressively paid down their debts and after the lenders wrote off several unpaid debts following the financial crisis.

These results show that borrower typically falls deeper into debt. It has resulted in the rise in the number and amount of enrolment in debt settlement programs. In fact, reports say that this rise is almost seven times rising from $1.7 billion to $12 billion in just a couple of years.

According to the survey by the debt settlement industry trade group is found that the data from credit reporting companies are mostly used by the debt settlement firms. To find and solicit consumers whose debt is rising and who are looking for debt relief to sort out their financial condition.

The difference in pitch

Lenders often flood mailboxes of the indebted consumers with offers of loans but when it comes to reality and the consumers call, the pitch is entirely different. For example, when the consumer their loan application get rejected. They often get a loan offer from a different company. Sometimes twice the amount wished for and at almost half the rate offered by traditional lenders. However, when they call them up for the loan they are once again turned down and instead offered with a debt settlement program.

  • This is the common working process of the debt settlement companies to get more customers, highly indebted. They say that they are offering help because the consumers are in a financial crisis. They typically, ‘get the client’s guard down.’
  • On the first attempt, they will usually promise to get back after the loan underwriting. Checks are made and when they do get back to the consumer in distress on their second call. They say the caller could not qualify for the loan offer mailed by them.
  • It is during this time that they, with the utmost respect, will make an offer for a debt settlement to get the previous loan cleared.

Therefore, be wary of the loan and debt-free offer and never take up anything without consulting a professional credit counselor to prevent your situation from becoming bad to worse.