Debt consolidation lead

Love them or hate them, Debt Settlement Companies have now pushed their way into the mainstream. This has of course caught the attention of the powers that be, and now there is a rush to regulate these programs. But what are these programs and what do they actually do for consumers? Are they the White Knights riding in to rescue the poor downtrodden consumer, as their commercials suggest? Or, are they they evil, modern day carpet baggers that the regulators claim are robbing consumers blind while making their financial situations worse?

For purposes of this Article, when I talk about Debt Settlement Companies, I am going to be specifically talking about 98% of the Debt Settlement Programs out there. Of course there are always exceptions to the rule and there are a few programs that actually do things very differently and focus on the consumers needs and circumstances.

Here is the typical sales pitch that you will hear from a debt settlement salesman hoping to sign you up into their program. It is your Lucky day Mr. Jones, we have a great solution to your financial troubles. Let me outline the benefits of becoming a client of ours.

1. We will negotiate with your creditors and cut your debt in half.

2. We will give you low, easy monthly payments that you can afford.

3. We will contact your creditors and tell them to stop contacting you.

That sounds like an answer to your prayers. Well not so fast. That is the sales pitch. Let me draw upon a few years of experience helping consumers out of tough financial situations to interpret what the salesman actually means.

1. We will automatically siphon money out of your account every month to cover our enormous fee (usually 15% of your debt).

2. If you are still sending us money after our fee is collected, we will start to set it aside to settle your Debts.

3. Your creditors will not get any money until after we get our fee (for doing what I am still not clear).

4. By making these low payments it will take years before you have enough money to settle the debt and you will likely be sued before you get there.

5. When we send these letters to have the creditors stop calling you it will really increase your chances of getting sued.

6. I only need to fool you for a few months because we will get our entire fee upfront.

These Debt Settlement Companies operate on volume and it is all about sales. In fact sometimes up to 80% of your fee is actually going to the person or group that sold you into the program, not to perform this excellent service that you are led to believe you are receiving.

The concept of Debt Settlement can make sense in certain situations but it is imperative that you educate yourself on the financial strategy of Debt Settlement before contacting a Debt Settlement Company for a free Consultation (Sales Pitch). Most of them earn their money when they sell you into the program not when they solve your problem. If that isn’t a huge red flag, I don’t know what is.

By: Damon Day

Debt settlement is a system where a settlement company “settles” or negotiates reduced payments to debtors on your behalf. People who are considering this or are already participating in it are usually facing serious credit problems, maybe even bankruptcy.

There can be negative consequences on your credit report for a while when you enter into such a program. There also will be positive effects from it a little later on.

Before most debt settlement companies will even begin to work with you, your debt should be in arrears by a few months. This means the accounts are marked past due etc. Naturally, this puts a black mark on your credit report, because of your payment history. This mark is not going to stay there for years and years though like a black mark from a bankruptcy will though. This is only going to be there a short while.

As you continue to work with the debt settlement company your credit, report will improve though. Now that you are working with the debt settlement company and they are working to pay off your debts one at a time at a lowered rate of interest, lowered balance, and no penalty charges your credit report will get better. Your score will start to go up. Do not close the accounts when they are paid off though as this will negatively impact your score. It lowers your debt to income ratio, which is not good. By keeping them open, you have more available credit (that you are using part of until all the cards are paid off). This looks better to credit companies. It will also raise your credit score because you have more available credit.

It takes the average client of one of these companies between two and five years to pay off all their debts. Your credit report will not suffer for that whole period. The period where it does suffer that small amount is worth it to soon be debt free.

By: Hector Milla

Once you have made the decision that you need help managing your debt, the question that arises is where to get this needed help. How do you get the help you need without being ripped off? The fact of the matter is that there are a lot of agencies out there who can charge outrageous fees just for managing your debts – and then you will find yourself having bigger problems than before you let them handle your debt!

Keeping this in mind you have to be very careful about which company to cooperate with in order to get rid of your debt. You have to research different companies in order to make the right choice. It pays to investigate the company history, the service background and most importantly the testimonials of former clients. These first hand experiences will tell you whether or not the company delivers the results they have promised, and if there are any catches to the services they offer.

Once you have reduced the number of companies based on your initial research, you can make an appointment with every company and see what they have to offer. If there still seem to be too many candidates, choose a sample (perhaps 5, say) who seem to be worth further investigation.

Before you attend the meeting, write down for yourself what you expect from the company and what you want to ask them. (This will help you to keep the important things in mind without being sidetracked by smooth talk.) You should get something in writing from them setting out the different kinds of programs they have to offer, and whether or not they charge you for it – and if so, how much for each program.

Once you have obtained all this information you can sit down and see which company best meets your needs. While you may not be able to compare apples with apples (ie not all companies will necessarily offer identical services), simply go with the one that has the best fit for your situation. It may be a program where you go completely back to basics, and everything is paid off within a short amount of time.

Or perhaps a program where you still have some extra’s and the pay off period takes a little longer. Different organizations may have their own “style” of debt management, and this is something that you can educate yourself about when meeting with their representative.

Another factor to take into account is whether or not the company takes it all out of your hands, negotiates with the creditors and executes the plan for you, or do they just balance it out and let you do the rest yourself, still leaving you a bit in the dark. You may rather pay a little fee for a company that really sticks its neck out for you and follows through on everything.

This may be an especially appealing option if you have experienced personal aggravation from creditors in relation to the debts. You may even find a company that can provide you with education around managing your money into the future, past execution of the plan, to ensure that you don’t find yourself in a similar situation again.

Debt management companies can be helpful in getting out from under the burden of debt. However, if you do decide to go down that path, it is wise to do your homework and find the debt reduction plan that is going to work for you. Trusted friends or family can be helpful in assisting you to choose from a range of companies and options for reducing your debt.

By: Amy Myer