You answer the phone. A pleasant-sounding man or woman asks, “wouldn’t you like to reduce your monthly loan payments and credit card payments – guaranteed?” This might sound very appealing, especially if you’re having a problem paying your debts. That nice-sounding man or woman may even say that they can lower your interest rates and reduce your debts.
Beware of claims like this
While you might be tempted to take up the offer, beware. There are con artists running many of these debt settlement programs who can’t and won’t deliver on what they promise. If you sign up for one of these programs it could cost you hundreds of dollars and you could find yourself in worse shape financially than before. You would owe just as much, plus you would likely have to pay late fees and other penalties.
The problem is widespread
The Federal Trade Commission (FTC) has sued more than 12 debt relief companies in the past several years. The Commission says that these companies simply lie about what they can do. They may even say they are nonprofits when they are actually for-profit companies. They claim to be a non-profit because they know that will make you feel better about signing up for their service. Some of the bad guys in this business also lie to people about their charges. They may say they charge nothing or just a very small fee. Some won’t even mention fees at all.
Look for warning signs
If you’re contacted by one of these companies and it claims it can negotiate settlements with all of your creditors that will cut the amount you owe by as much as 50% to 70%, watch out. It is just about impossible to do this under most circumstances. These companies are making promises about something they simply can’t deliver.
A better option
If you’re laboring under a heavy load of debt, credit counseling might be a better option. Real credit counselors understand that there is no one, single answer for everybody. A legitimate counselor will give you a free and unbiased assessment of your situation. He or she will then help you develop a customized payment plan that should enable you to pay off your unsecured debts in five years or less. Even better, you will have to write just one check a month to the credit counseling agency and it will pay all your creditors.
Do the research
If you have mounting debts, it can be very scary. However, what you decide to do about those debts shouldn’t be based on having heard a radio commercial, seen a TV commercial or received a phone call. The important thing is to find a trustworthy company that will create a debt relief plan custom tailored for you.
When debt settlement might make sense
If you’re so seriously in debt you been unable to make even the minimum monthly payments on your debts for five months or more, debt settlement could be a good option. In fact, an honest debt settlement company can settle your debts for less than you owe and provide you with a customized payment plan that should help you become debt free in 24 to 48 months. However, it’s important to choose a company you can trust.
How to know if the company is trustworthy
There are signs that a debt settlement company can be trusted. For example, it should have been in business for a number of years. It should be associated with organizations such as the US Chamber of Commerce and have at least an A-rating from the Better Business Bureau. It shouldn’t require any payments up front and any money you send it should be deposited into an FDIC-insured trust account. Finally, a legitimate debt settlement company won’t charge you anything until it has settled all of your debts to your satisfaction and provided you with a customized payment plan that you approve.