Shady Debt Consolidation Promises To Be On The Lookout For

If you are being inundated with phone calls from debt collectors demanding money, and advertisements that blare "get out of debt now," debt consolidation and debt settlement businesses may be looking very good to you at this current moment. With debt settlement and consolidation centers, you combine your debts and pay a portion of the total. However, many of these businesses may be just too good to be true.

Any debt consolidation place that seeks to satisfy your debt for "cents on the dollar" should be considered dubious. After all, it is difficult, near to impossible to make and keep a promise like that without being aware of the details of how long you have owed the money, how much money you owe, and to which creditors. These debt consolidation companies aren't aware of your past payment history. They don't know what creditors you owe. Also, each person has different assets that can be used to satisfy their own debts. You can never make a blanket statement.

Debt settlement centers that guarantee that you will be debt free in three months should also be taken with a grain of salt. Again, the business is unaware of how much you owe, or who you owe it to. Additionally, some obligations, such as student loans, child support and back taxes cannot be covered in a debt settlement plan.

Companies that claim that you can not obtain help without paying an upfront fee or deposit may be less than reputable. While some debt consolidation businesses may accept an upfront fee of as little as fifty dollars, generally, the person in debt pays the debt settlement company a percentage of the debt owed, often fifteen percent, for negotiating the deal.

Generally, the firm will negotiate a payment between you and the businesses and people you know and will accumulate enough money to make that payment. The debt settlement company will hold on to the money until you reach the settlement amount.

In the meantime, your creditors are not being paid. Unfortunately, while you are accumulating that payment, you are not paying your bills and you may be delving further and further into more debt. Instead of taking this gamble check out a not for profit credit counseling firm that might charge you only twenty dollars, if anything. Instead of billing the debtor, these non profit counselors will generally get what is called a fair share percentage payment from your creditors after your debts have been paid.

Finally, and most important, do NOT automatically trust in the debt settlement counselor who let's you know that "We will handle everything. You should stop communicating with your creditors." Despite the thought that the idea of not speaking to creditors and ignoring their mail sounds like it could be a real load off of your back, ultimately, it is your debt, your money owed and your credit score at hand. Never send in a change of address form directing all creditor mail to a debt settlement company.

It is important to bear in mind that the creditor is the one with whom you signed your contractual agreement. When all of your statements are being sent to the debt settlement company, you relinquish that control. You do not know how much in interest and late fees are being tacked on. You also won't know if your debt has been moved into collection.

A few final words of wisdom. If you believe that you need debt settlement, try debt management first. Call up your creditors and request suspended payment, reduced interest or any other payment terms that may suit your financial situation in a more favorable light. Even though it might seem like a long shot, or a pain, it is always very important if you are about to miss a payment to call your creditor and say "Listen, I can't make this month's payment. I'd like to work something out with you."