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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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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