Can Debt Negotiation Services Help?

Recently, it seems that my inbox has been full with one question even more often than usual.  Many of you who are working to reduce debt are seeing, hearing, or reading the advertisements and wondering if debt negotiation services could help you get out of debt.

I have already talked about credit card debt negotiation and addressed debt settlement pros and cons in a couple of articles.  Still, it seems that the bombardment of ads have made many of you curious about just what these services do, and whether or not they can help you out with your debt.

As we have stated many times here, we believe that a debt negotiation service is rarely, if ever, a good option to help you get out of debt.  In fact, in most cases, these companies can leave you in even worse shape than you were originally.  

To understand how debt negotiation companies work, check out the articles linked above.  You will see how the process works, and why so many customers have complaints about them.

In fact, the FTC has posted an article on it’s website titled Knee Deep in Debt, explaining the various debt relief programs available and some of the pros and cons of each.  The article contains a section devoted to debt negotiation programs and addresses some of the claims these companies make, and then explains the truth about what actually happens.

According to the FTC, when dealing with a company such as this “there’s no guarantee that the services they offer are legitimate. There also is no guarantee that a creditor will accept partial payment of a legitimate debt.”  The article goes on to say:

creditors may have the right to sue you to recover the money you owe. In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home. Finally, the Internal Revenue Service may consider any amount of forgiven debt to be taxable income.

The fact of the matter is, despite what all of the ads claim, these programs are usually not in your best interest.  There are usually better options and more favorable ways for you to get out of debt, such as speaking with a non profit credit counseling agency.

However, if you still wish to negotiate your debt even after reading all of the above information, there are a couple of things to consider.  First, realize that there are probably much better options available for you than working with so called debt negotiators.  Second, you may want to think about negotiating the debt on your own.

Creditors are often willing to negotiate with you directly when you are behind on your debt, so you could save on the substantial fees that a debt negotiation services usually charge.  As always, feel free to ask any questions you have in the comment section below.

This entry was postedon Monday, July 12th, 2010 at 5:41 pmand is filed under Tags: credit card negotiation, debt negotiation, debt negotiation services, debt settlement.You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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THE 7 DEADLY DEBT SINS

Greed, Gluttony, Lust, Pride, Wrath, Envy and Sloth; but did you know they can be applied to your financial situation? Almost everyone who is struggling with debt can blame their problems on at least one of the above behaviours.

Greed, also known as Avarice, is the compulsion to accumulate more than you need. A sin of excess, Greed is characterised by hoarding or seeking out ways to gain material wealth. In debt terms, this can be seen in people who hold several credit cards, or regularly go on shopping sprees to buy things they don’t need, for the sheer love of spending money. It’s a damaging behaviour, and usually results in large amounts of credit card debt which, as we all know, can take years to clear if you only make minimum payments each month.

Gluttony, often confused with Greed, relates to food consumption. Another sin of excess, Gluttony is the act of consuming more food than you physically need, often to the point of waste. In the world of debt, Gluttony is committed by those who regularly choose takeaway meals or meals in expensive restaurants instead of staying at home and preparing cheaper home-cooked food.

Lust is also known as Extravagance, which is directly linked to Greed as the frequent buying of unnecessary luxury goods. This is a major factor in debt sufferers; often their debts are a result of spending much more than they can afford on items which have no real worth.

Pride is often thought of as the original, or ultimate, sin, the sin from which all others descend. We all like to feel that we’re as important, if not more so, than our peers, and in today’s materialistic society this feeling of importance is often achieved by the accumulation of expensive possessions. We judge one another on material wealth: the clothes we wear, the cars we drive, even the house we live in all provide onlookers with an idea of our lifestyles. Of course, lavish lifestyles come at a price, and for someone trying to appear wealthier than they are, by purchasing expensive goods, the debts can mount up alarmingly.

Envy is linked to both Pride and Lust. Not to be confused with jealousy, which is the fear of losing a person or possession to another, Envy is the desire to have something which another person has. From a debt perspective, seeing another’s expensive television or designer clothes might prompt the envious to go to any means in order to possess a similar item. This can include taking out credit cards or loans in order to pay for the item, and thus the debt begins.

Sloth also encompasses Acedia and Despair (thought of as sins in Catholicism), and they can be described as; the reluctance to tackle problems or situations which should be dealt with (Acedia), the feeling of hopelessness in a situation (Despair) and the indifference or even denial of the problems at hand (Sloth). Put together, this is perhaps the most damaging sin to a person in debt as they allow their debts to mount up and get worse, rather than tackling them head on and working to reduce debt.

Wrath may not seem to fit into a debt perspective, but it can actually be productive in this sense. Wrath is a feeling of anger towards a particular person or situation, and in the case of debt, it can be anger towards oneself. Who hasn’t, at one time or another, felt angry at themselves for buying that unnecessary item or not making that payment? A person in debt may feel angry enough at themselves and their situation to actually do something productive about it; whether that be setting a budget, looking at debt consolidation or even something as drastic as cutting up their credit cards.

Whatever behaviours have led to your debt problems, rest assured there are

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Debt Negotiators: Scam or Solution?

Many of you are searching for debt reduction programs that actually work and can get you out of debt without ruining your credit or leaving you in worse shape than you already are.  There are solutions that could possibly help many of you, but debt negotiators are almost always NOT a good option.

We have talked about how debt negotiation services work in previous articles.  In short, a settlement or negotiation company will have you sign a contract and agree to send a monthly payment to them to cover your debt.

These monthly payments, however, will NOT go to your creditors.  The funds are simply held by the company for several months, with their fees being deducted every month.  Eventually, you will save up enough money for them to attempt to settle one of your debts.  Then and only then will the company contact your creditor and attempt to negotiate your debt.

The major problems with this model are widespread and fairly obvious.  First, your creditors are not getting paid during this process.  We all know that credit card companies are usually not very happy when you start missing payments.

Obviously, fairly major damage can be done to your credit.  Still, many people seem to shrug off worries about their credit score and just want to get out of debt.  While we wish that more people would reconsider this line of thinking, debt negotiators still are not the answer these people are looking for to help reduce debt.

While your credit cards go unpaid, you will normally have interest and fees added on to what you already owe.  Your balances will keep rising, and you will probably be getting collection calls every day.

The most shocking fact to many people is that there is no guarantee that a settlement with your creditors can be reached.  If this happens, you are the one responsible for paying of the now much larger debt, and you’re stuck with ruined credit.  Your creditors can even choose to sue you for your balances if they wish to.

The worst part is that, if any of these very bad things should happen, most people will not receive a refund for the thousands of dollars in fees that they paid to the credit card debt negotiation company!  Many consumer have been left feeling like they paid thousands of dollars only to be left in even more debt.

Rather than putting your finances in the hands of these risky services, you’d be much better off paying the debt on your own or speaking to a non profit credit counselor.  However, if you insist on working with a debt negotiator, at least be sure to research the pros and cons of debt settlement very carefully.

This entry was postedon Monday, July 19th, 2010 at 5:25 pmand is filed under Tags: debt negotiation, debt negotiation services, debt negotiators, debt reduction, debt settlement.You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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Debt Reduction Strategies that Work

If you are reading this, you are probably looking for credit card debt reduction strategies that will actually get you out of debt.  Unfortunately, it can be extremely difficult to find good advice that you can trust on this topic.

Many websites and/or commercials that you come across have an agenda, and it is not to simply help you reduce debt.  Instead, their goal is to make money for themselves, whether or not they actually help you with your finances.

In fact, many of these so-called debt reduction programs can actually ruin your credit and even leave you in MORE debt.  Obviously, you will want to avoid any service or company that has the potential to harm you rather than help you financially.

You should almost always steer clear of debt negotiators and debt negotiation services (for more information on what to avoid, check out this article on debt settlement pros and cons).

Strategies You Can Do on Your Own

A lot of times, you don’t actually need help from any outside company to get out of debt quickly.  In fact, the first thing you should do is determine whether or not it is possible for you to handle your finances on your own.  Of course, it does take a lot of willpower and discipline to come up with and stick to your own debt reduction plans.

One of the most popular do it yourself strategies these days is the “debt snowball” method.  With this plan, you basically pay off your lowest balance first, while making near minimum payments to your other debts.  Once you pay off the lowest balance, you take the money you were sending to that account every month and apply it to your next lowest balance.

This method works because it gives you a psychological edge over the traditional method of paying off high interest debt first.  However, if you have the discipline to stick with it, the best method for you may be to pay off higher interest debt first rather than using the snowball method.

Loans and Balance Transfers

One very popular debt repayment strategy is to consolidate with balance transfers to another credit card or through some type of loan.  This can be a smart method if you have the discipline to pay off and not rack up more debt, and if you have the good credit needed to obtain loans at a favorable interest rate.

Many people take out home equity loans or refinance their mortgages to pay off unsecured debt.  While this can give you lower interest rates and a lower monthly payment, this is not always the best option.

As the recent troubles in the housing market and economy have shown us, when you roll your unsecured credit card debt into a new debt secured by your home, you are at risk of losing your home.  Most of the time, this is simply not worth the risk.

When You Need Debt Help

If you determine that you do need debt help, it is important to know where to look.  As I said earlier, you should avoid debt settlement companies at all costs.

The best help you can find is usually through a non profit credit counselor.  A legitimate counselor should be knowledgeable and accredited.  You should also check with the Better Business Bureau before working with any type of company to help you with your debt.

This entry was postedon Monday, August 2nd, 2010 at 3:10 pmand is filed under Tags: debt help, debt negotiation, debt reduction, debt reduction plan, debt reduction services.You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

« Debt Negotiators: Scam or Solution?Choosing Between Debt Consolidation Options »One Response to “” 1Anne Says:

Hi – I did have an hour session on the phone with a non-profit counselor. He suggested many of the things you have listed here. It was a sobering experience! I had mixed results when I contacted my creditors directly – Chase did give me the option to reduce my interest rate to 2% and pay off the balances in 5 years. (At the same time as closing the account.) I enrolled, and it is reducing my debt.

This is a very important topic, and one that I am really trying hard to incorporate into my day-to-day decision making.

August 13th, 2010 at 1:03 am Leave a Reply

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Choosing Between Debt Consolidation Options

When most of us finally decide that we want to get out of debt, the first thing many of us think about is “debt consolidation.”  However, with the many different companies and services promising to help us, this can be a very confusing option for us.  There are actually several different ways to consolidate your debt, and each of these debt consolidation options comes with it’s own pros and cons.

With that in mine, I thought I’d help spell out and explain some of the various options for consolidating debt.  It is important to remember that each situation is different, so debt reduction strategies that are best for one person may not be the best option for you.

Home Equity Loans and Refinancing

Before the recent housing and credit crisis, refinancing and/or taking out a home equity loan (also sometimes referred to as a second mortgage) was one of the most common ways to consolidate and reduce debt.  The benefits of this method were pretty obvious.

Rolling debt into a home equity loan, or refinancing and using home equity to pay off debt, usually results in lower interest rates and lower monthly payments overall.  For people on a tight budget, this often seemed like a great idea. However, as the recent housing and economic collapse proved, there were some drawbacks that many people did not consider.

The biggest drawback to this option is that it turns your unsecured debt into a debt that is secured by your home.  In other words, with this type of unsecured credit card debt consolidation you are now at risk of losing your home if you cannot pay off the debt, where before your home was not at risk.

Another thing that few people consider is that, despite the lower payments and interest rates, many people actually pay more money in the long run.  The payments on these loans can be stretched out over as much as 30 years if you refinance your home, meaning you could still pay more money in interest than you would have.

Balance Transfers, Unsecured Loans

Another commonly used option is transferring balances to a credit card or using an unsecured loan.  These basically amount to the same thing, since unsecured loans are practically the same as credit cards in terms of interest rates and payments, and both are unsecured.

These may be convenient and simple options for many, and if you can find a loan or card with a fixed, low rate and with low or no balance transfer fees, then this could be a great option for you.  Unfortunately, it’s not always so simple.

Most credit cards advertise low teaser interest rates that go up after 6 months or a year.  Most people will not pay off the debt that quickly.  If you have to pay balance transfer fees on top of that, then you may be worse off than you were originally.

The biggest problem with this option is that many people are unable to qualify for a low enough rate for the long term or, if they can, they aren’t granted enough credit to consolidate all of their debt.

Other Consolidation Options

Many people looking to consolidate unwittingly get roped in by debt negotiation services.  We have covered how these debt negotiators operate in several other articles, but for now all I will say is that this is NOT a real consolidation option.  If you are considering this option, you should first research debt settlement pros and cons so that you at least know what you are getting in to.

Another possible debt reduction plan that might be considered is a debt management plan.  This is also not a true consolidation, but it does offer one consolidated, lower monthly payment as well as lower interest rates.  These plans are also not for everyone, and you should first speak with a qualified, accredited credit counselor before considering this.

You can also look into local options for help, such as Ohio debt consolidation for residents of Ohio.

This entry was postedon Friday, August 13th, 2010 at 3:24 pmand is filed under Tags: credit counseling, debt consolidation, debt reduction plan, debt settlement, pros and cons.You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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Carnival of Debt Reduction: End of Summer Edition

As the fun and sun of the summer winds down to a close, I tend to do the same thing that many of you probably do: I realize how much I have overspent on my summer travels and fun and begin to turn my attention back to my finances.  For many of us, summer is a time of fun and splurging.  However, we all have to wake up to the reality of our personal finances eventually, and by the time autumn rolls around many of us will need to refocus on our goal to reduce debt.

With that in mind, I thought a great way to get our minds back on track would be to host the Carnival of Debt Reduction.  We have previously hosted this carnival twice before, and enjoyed it every time.  Each time we received great submissions from some of the best personal finance blogs on the web.

It is an honor to be able to work and interact with these very knowledgeable and talented bloggers.  As always, the carnival is focused on personal stories or advice related to debt reduction strategies.  Articles that are unrelated to credit card debt reduction and/or reducing debt were excluded from this edition.

If you are looking to get on the path to financial freedom, or if you are looking for advice on effective debt reduction programs, the following articles are a great place to start:

This Week’s Top Articles

There were a ton of great submissions this week, including some great articles that I could not include due to them being off topic.  However, in my personal opinion, there were a few that interested me and stood out.

This first post truly caught my attention because it is  topic that we often talk about here on this site.  Jim over at Bargaineering addressed the topic of deciding whether or not doing a balance transfer is worth it.  If you are thinking about using a balance transfer offer to reduce your debt, be sure to check this article out!

Another topic that we have covered fairly often is credit card debt negotiation.  Craig over at Free From Broke did a great write up this week giving some outstanding tips to renegotiating your credit card debt.

And finally, Studenomics submitted a great article offering up tips on how to Speed Up Credit Card Debt Payment, a must read for everyone hoping to pay off their debt faster.

More Outstanding Articles

The Doughroller contributed an interesting article on ways to protect your credit score.  A good credit score can give you more options for reducing debt.

PT Money discusses how student loans and credit card debt can hurt your chances of financial stability and wealth post college in this article, Does a College Education Equal Financial Security and Wealth?

Debtors Unite included a very good article that takes a look at the many different debt relief programs, which is also a topic we have discussed here often.

And last but not least, John from Best Debt Relief Plans wrote about Avoiding Debt Scams while the Wealth Pilgrim addressed How Small Business Debt Relief is Done.

This entry was postedon Monday, August 23rd, 2010 at 1:46 pmand is filed under Tags: debt help, debt negotiation, debt reduction, debt reduction services, reduce debt.You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

« Choosing Between Debt Consolidation OptionsCredit Card Debt Reduction Services Reviews »3 Responses to “” 1MD

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Credit Card Debt Reduction Services Reviews

Researching and looking for credit card debt reduction services can be incredibly confusing, especially if you are doing your research online.  All of the conflicting information, confusing terminology, and thousands of companies claiming they can help you with debt reduction, it’s enough to make many people want to give up before they ever get the help they need.

For those of you lucky enough to find this site, I am going to walk you through the four main types of services that claim to help you get out of debt.  I will give you a general explanation of each service, and give you an idea of which services to avoid and which might work for you.

Keep in mind this is just a general guide, and you should always get advice tailored to your specific situation.  You may also want to read this related article on the various debt reduction programs.

Debt Negotiation and Settlement

The first service we will talk about is the one that, for now, is advertised the most.  Credit card debt negotiation, or debt settlement, is generally the worst of all of these options. Unfortunately, due to the heavy advertising, it is also very popular.

In this case, the claims you see on commercials and ads are usually too good to be true.  Most of these companies promise to reduce your debt by 50 or 60 percent and maintain your credit rating.

In reality, these companies will almost always do serious damage to your credit score and rarely deliver on the promise to settle all of your debts.  Be sure to read up on the costs and pitfalls of these  debt relief scams as well as the pros and cons of this method.

In fact, most debt settlement companies will have either a poor rating with the BBB or a very short history.

Credit Card Consolidation

Another one of the very popular debt reduction strategies is some form of consolidation. Consolidating your credit card debt typically requires a good credit score and the ability to obtain credit.

While some settlement, bankruptcy, or even credit counseling companies claim to consolidate your debt, they don’t actually do so.  In order to combine your actual debts into one single new balance you need some type of loan (or credit card).  You can read more about your debt consolidation options in this article.

Debt Management Plans

Debt management plans, which are sometimes referred to as credit counseling, is an option that is generally provided by non profit agencies.  However, their are also a few for profit companies that provide this service as well.

With this option, the credit counseling agency works with your creditors and gets them to agree to a lower interest rate and, usually, a lower payment.  You make your payment to the credit counseling agency, and they sound it out each of your creditors every month.

This can be a good option for people who need a little help, especially if they don’t have the ability to consolidate the debt to a loan with better terms and they cannot pay the balances down quickly on their own.  You should speak to an accredited credit counselor and have a full counseling session to get information on if this is a good option for you.  If it isn’t, a good credit counselor should still be able to help you come up with some type of debt reduction plans.

Bankruptcy

One final option is bankruptcy, and it should be just that: a last resort.  Try out your other options and make sure you have no other choice before filing for bankruptcy.  There are some negative consequences you will want to avoid with this option; however, when you are out of options then bankruptcy could give you the relief and the fresh start you need with your finances.

What experiences do you have with credit card debt reduction services?  Feel free to leave a comment or questions about your own experiences.

This entry was postedon Thursday, September 2nd, 2010 at 3:23 pmand is filed under Tags: credit card negotiation, debt management plans, debt negotiation, debt reduction plan, debt reduction services, debt settlement, reduce credit card debt.You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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