A time may come in your life when you will find it difficult to manage your debts properly and prevent from falling behind. During these times when you surf through the internet looking for useful and effective ways to get rid of your debts, you will come across several debt relief services, private or controlled by the government.
It is then you may wonder what is all about the debt settlement, debt consolidation, credit counseling and other debt-relief services and whether or not you should use one of them for your debt management purposes. Well, knowing the reasons will help you the take a decision with more confidence.
Features of the debts relief companies
A debt settlement company or a company that does both, debt settlement and consolidation will have specific features, services offer and working process that will separate them from other debt relief services such as a credit counseling agency.
A debt settlement or consolidation company also sometimes referred to as “debt relief” or “debt adjusting” company usually will negotiate, settle, and in some way alter the terms of a debt of a person to a creditor or debt collector.
However, dealing with these companies can be risky because they will often make promises that they cannot keep or entitled to such reducing the amount that you owe. Therefore, you should consider and weigh all of your available options including working with a nonprofit credit counselor and negotiating with your creditor or debt collector directly yourself.
The things that you should consider are:
- The fees – This debt settlement and consolidation companies may often charge expensive fees from their clients. In addition to that, you will also have to pay penalty interest, late fees, and other charges when you stop paying your creditors as encouraged by these companies. You will also have t pay a monthly fee for the special account created especially to build a fund for settlement.
- The creditor’s choice – In most of the cases, the creditors may deny working with the debt settlement and consolidation company you have chosen. Instead, they may step up their collection efforts and even file a lawsuit against you. In several cases, it is seen that these companies are unable to settle all your debts.
- The savings factor – Unless the company settles most or all of your debts the savings achieved by the company on the debts that are settled may be wiped off due to the built-up fees and penalties on the unsettled debts.
- Credit affected – When you use the services of such companies it will surely have a negative impact on your credit scores and it will lower your ability to get a credit in the future.
Therefore, you will need to consider the warning signs so that you are not left deeper in debt than you were initially. Some of these warning signs include a company that:
- Charges their fees before settling any of your debts
- Claims that it can settle all of your debts for a specific percentage reduction
- Touts their programs as “new government program” to pay off personal credit card debt
- Asks you to stop communicating with your creditors
- Guarantees success and take your debt away
- Promises that it can stop collection calls and debt lawsuits and
- Guarantees that you can pay off all your unsecured debts for pennies on the dollar.
In order to make sure that you have chosen the right company to do business and stay away from further debt issues, contact and consult with a local consumer protection agency or your state Attorney General. They will be able to tell you whether or not there are any consumer complaints against the firm on their files. Also, check with them whether or not the firm needs to be licensed as a few states require such companies to be licensed. If so, find out whether or not the firm has a valid license.
Credit counseling service
You will also come across an alternative to a debt settlement company when you look for debt relief options and assistance at Nationaldebtreliefprograms.comor others. This is non-profit consumer credit counseling services. They will work with you and your creditors and offer a large variety of services such as:
- They will develop a debt management plan which will be easier for you to follow and get out of debt.
- In addition to that, they will also help you craft a budget along
- They will also provide you with other financial counseling and
- They will offer free workshops and educational materials.
The differences between a credit counselor and a debt settlement company or any other debt relief service are:
- They are usually non-profit organizations but others are for-profit companies and will charge a fee for their services though they cannot charge it until they complete a service
- They advise on money and debt management and budget your payments while others will settle your debts with your creditors or debt collectors
- They will design proper payment plans or even make an agreement with your creditors that they will not pursue their collection efforts or charge any late fees while you are on the plan but will never promise to reduce your debt amount like others
- They will not have any up-front agreements with your creditors which is a possibility when you work with others
- They will see that your overall monthly payments are lowered and not promise on reduction in the amount of money you owe to your creditors
- They will not require a specific account created to deposit your money or advice you to stop paying or communicating with your creditors like others
- They will help you to negotiate your monthly payments but all their payment plans will not have any tax implications or risks of damaging your credit.
However, there may be a few credit counseling organizations that may charge a fee for their service even being non-profits.
Therefore, make your choice after thorough research and choose the best available option that suits your needs and affordability.
