Debt Consolidation - Debt Solution - Debt Reduction - Debt Settlement - Debt management
Debt consolidation companies can be a real help but also beware of scams.
If you decide to use a debt consolidation company, first check the company out with your State Attorney Generals Office and the Federal Trade Commission (FTC).
A counselor that works on a commission basis had better bring in the clients (you), or lose their job. That's about the truth of it.
A lot of claims that are made are a carrot on the stick to get you into the program.
There have been reports of situations where people sign up and then get a letter that says that the creditors have changed their policy, and you have to make a larger payment.
So now your monthly payment to the debt consolidation company grows until you are in the same high payment situation that you started out with at first.
Ask for references as well as the FTC etc.
But! There are a bunch of great companies out there so don't be forestalled.
How Debt Consolidation Works
Debt management companies and debt solution companies and debt reduction companies and debt settlement companies are often pretty much the same as debt consolidation companies. It's a matter of wording.
The debt consolidation company has no say in what the creditors charge.
You do it yourself if you are sharp enough and dare to take on the beast.
Many people are terrible at negotiating and so it may be best to use a debt consolidation company.
In general, they should all charge about the same You usually can't get a monthly payment reduction of less than 50%.
It is typical to have to pay the creditor about 3% of the debt to start and a monthly service fee.
A federal student loan can't be changed by debt consolidation companies.
Deal with them yourself directly and they usually can work with you, to handle your debt in a practical way.
Debt consolidation companies will often be able to convince your creditors to waive much of the interest and late fees already imposed.
Remember: Even if they say that they are accredited or staffed by a religious group you should still check them out for yourself.
If you screw up and are late on payments after you start the program, the creditors will once more charge late fees and penalties.
They don't want excuses and really don't care about you. You have to be on time and not mess up the deal. It's your problem, not theirs.
If you start on a program, the phone calls will usually stop.
These companies can't rebuild your credit, but you can by being on time with all payments and getting caught up with the bills.
Some states are starting to regulate how much these programs can charge for monthly service fees and up front payment fees.
You will usually go over the numbers with the debt reduction counselor and
see how much you can save in interest and penalty fees.
If you add in the service fee from the debt consolidation company, it should still come out a lot better.
If you use a good company that is dealing with your creditors on a regular basis such as major credit card companies that is a phone call from them to the creditor, might go like "Hi John this is Paul from "Such and Such" credit counseling". They are already on friendly terms from past dealings.
The process can go a lot more smoothly.
Get going toward a brighter future.