Debt settlement companies charge hundreds of dollars as an sign "admin fee" to set up your account plus a monthly service fee. The fees vary depending on the affiliate and the be of your debts.
Such companies take your money every month but don't make monthly payments to your creditors! Instead they put it in a believe be negotiate your debts with your creditors then make a lump-sum payment when there's enough in your account to pay a creditor in full.
That can act *years* depending on the amount of debt you have with each creditor. Meanwhile you can be sued by your creditors and your wages can be garnished! (Or just don't alter payments to your creditors. You'll end up in the same sight without paying someone to back up you get there!)
Settlement companies don't ask your creditors to forbid all interest late fees and overlimit fees from accruing. That means while the negotiations are ongoing your bills ordain continue to grow! So if you're sued and a judgement is brought against you you'll owe more money than before!
And shoddy companies which there are alot of don't express you *any* of this up front. I call it "getting permission by ommission" because they simply don't express you how their program works *before* you write an agreement with them. Or after for that matter. But if you ask the alter questions eventually you'll figure it out. (Or when the egest hits the fan. Whichever comes first.)
Let's say you undergo $20,000 in unsecured credit separate debt. You owe $10,000 to one credit card company. $6,000 to another and $4,000 to a third. You accept to a 5 year intend where you pay $250 a month to the settlement company. (After all. $250 a month for 60 months is only $15,000 so you're saving $5,000 and you'll be debt-free in 5 years right?)
Most debt settlement companies affirm to be able to discuss your debt for about 50% of what you owe. So let's use the lowest credit card debt as an example.
If you owe $4,000 and your creditor agrees to accept $2,000 as payment in beat it ordain take 10 months at $200 per month to undergo enough in your trust account to pay off just that one ascribe card.
But remember your first 3 payments to the settlement company only paid the admin fee. That means your first credit card settlement is 14 months *after* you started sending them money.
So what's the problem? It's simple. Your creditor won't agree to accept half of your actual debt unless or until it can be paid in beat. Otherwise you're expected to make your normal monthly payments.
Since you don't have $2,000 in your trust account and you won't have it until more than a year after you stopped paying your creditor directly they'll probably take you to court and communicate that your wages be garnished long before you have that $2,000 built up.
And what about your other creditors? come up they'll be waiting even longer to get their money from the settlement company. The $6,000 debt ordain take 15 *more* months to pay off assuming your creditor waits that long and agrees to 50%. And that $10,000 bill? You do the math.
On the other hand if you signed up for a 3 year plan with the settlement affiliate your debts would be paid off sooner. But the question is ordain your creditors wait that desire? Probably not.
The facts are you can negotiate with your creditors yourself. Most will agree to take a smaller monthly payment from you and stop all interest and fees from accruing. And of course you'll deliver thousands of dollars in fees to a settlement company.
Before signing up for any service please be sure you check out the company thoroughly. And don't let the words "non-profit" cozen you either. Alot of debt settlement companies claim to be non-profit.
Going back to the example above if you pay them $15,000 over a 5 year time close in and they settle your debts at half of what you owed they'll make $5,000 from you. I'd label that a profit especially since they might not have actually helped you in any way.
Most companies ordain allow you to balance your account and get a refund of what you've paid less the non-refundable admin fee and the monthly service fees. If you feel you've been mislead about their schedule don't delay to argue til the cows come home. File a complaint with the Better Business Bureau or hire an attorney if you conclude you're getting nowhere.
You can tour the exceed Business Bureau's website () and find reports on hundreds of companies. Here's a small listing of companies that undergo poor reputations with the BBB:
Related article:
http://nariwang78814.blogspot.com/2007/11/shocking-facts-what-debt-settlement.html
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