What Are the Things Debt Settlement Companies Don’t Tell You
If you’re in need of debt help and you’re planning on acquiring debt settlement or debt consolidation, don’t act too quickly. Take the time to learn as much information as you can about these two major “debt solutions” that most people turn to.
Is there a difference between debt settlement and debt consolidation?
Yes. Debt consolidation is where you take out a loan to pay off your debts to different creditors. Then you will pay the debt consolidation company in monthly installments within your loan term. In short, it’s like a second mortgage that uses your home as security for the loan.
On the other hand, the concept of debt settlement is to submit your monthly payments to the debt settlement company who in turn, will be the one to submit your payments to your creditors.
What are the things that debt settlement companies don’t tell you?
Some debt settlement companies take advantage of their clients by making them believe that their monthly payments are submitted to the appropriate creditors when in fact, they’re not. A debt settlement company may give assurance that an agreement with your creditors has been done when the truth is, it’s still an on-going negotiation.
Thus, you try your best to keep up with your monthly payments expecting that your payments reach your creditors when the truth, your money is just sitting on the debt settlement company’s account all along.
Worst, the interest rates and penalty fees on your debts are not eliminated. Since the debt settlement company wasn’t submitting any of the payments you’ve made, your debts continue to grow including interest and penalty charges.
Your money will be placed in a trust fund until it’s enough to pay one your creditors with a lump sum payment. Imagine how long it would take for you to save for a lump sum payment. It could take a year or more depending on the amount you owe. Would your creditors be willing to wait for that long?
You’ll only realize that you have obtained the wrong kind of “debt help” when your creditors start taking legal action against you. And, do not forget that debt settlement companies also charge you for their services. Yes, you’ll be paying for their monthly services when all they do is keep your money in a trust fund.
Work Out Your Own Solution
Obviously, debt settlement companies will never tell you the facts but it’s up to you to make the decision. The truth is, you can negotiate with your creditors on your own without mediation from a debt settlement company. Talk to your creditors and you’ll realize that they are willing to help you. Work out a solution where you don’t need to pay for any company’s services.
It may take more work on your part to meet with your creditors to negotiate but it would be worth your effort. In the end, whether you choose to obtain the help of a debt settlement or debt consolidation company, what matters most is how you keep up with your payments and how you handle your finances.
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