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Archive → May, 2012

Debt settlement tricks and traps

Debt settlement tricks and traps – What you are required to know

You may get debt settlement help when you’re not able to pay back your unsecured debts in full. To settle your debts, you can get help from a settlement company or decide to negotiate with your creditors and/or collection agencies all by yourself. Whatever option you choose, you must be aware of the tricks and traps of debt settlement so that you can avoid them. Read on to make yourself aware regarding the debt settlement tricks and traps and how you can avoid being a victim of a settlement trap.

Getting help from a non-reliable company

If you get help from a settlement company without checking the BBB (Better Business Bureau) records, then you may not get the services as promised to you when you enrolled in its program. To avoid this, always check BBB records to ensure there aren’t any complaints from the consumers who had opt to get debt settlement help from the company you’ve chosen.

Need to pay a hefty fee

The debt settlement companies may ask you to pay an upfront fee to get enrolled in the settlement program. Apart from that, the settlement companies may also charge quite a hefty fee for providing you with the services. Usually, the settlement companies charge a percentage of the forgiven amount as the professional fees, but some companies may not follow it.

So, before you enroll yourself in a settlement company, check its fee structure. Do you know that as per a new FTC rule, the debt settlement companies cannot charge an upfront fee? So, stay away from a company that asks you to pay a fee before offering you with any service.

Denial of verbal agreement

When you’re negotiating with a collecting agency, a collector on behalf of the organization may agree on a payoff amount. It may happen that you start paying on the basis of the verbal agreement only to find later that the collector denying the previous agreement and asking for more amount.

To avoid this, even if you’re negotiate over phone for settling your debts, always send a certified mail with return receipt request. Get everything in writing before you start paying anything to the collection agency in order to settle the account. Moreover, keep every record of communication so that you can produce it in future, if required.

While taking recourse to debt settlement, you must know that your credit score may get reduced by several points when you settle your debts. This is because you’re not able to pay back the total outstanding balance. So, after you’re successful in getting out of debt, try to manage your finances better so that your score gets improved and you qualify for loans at better terms and conditions in future.

How debt consolidation works and the benefits for those drowning in debt

Free debt consolidation services work for those caught in a vicious debt cycle by employing a few helpful strategies. 

How it works is that you are able to get all your different loans placed into a single new loan, and only have to worry about the one new loan. If you have regular income, you could get a low interest debt consolidation product and be able to manage smaller monthly repayments. If you are lucky enough to have a house where you own equity in it, you’ll find it fairly easy to get interest rates significantly lower than what your current loans are offering you. 

The way it works for lenders is that they get to purchase all your different loans at a discount from your current lenders. Your current lenders get to get rid of the risk of holding on to you as their debtor and your new lenders stand to gain a little profit via offering you their debt consolidation help. 

It should be noted however that for this process to be successful, that debtors need to have a certain degree of discipline. The danger is that once a debt is consolidation and your stress levels decreased, you might feel as if your debt has disappeared. You’ll need to remind yourself that all debt consolidation is doing is buying you time. That is time to increase your income, decrease your expenditures and work out a better plan for your future.