Do Debt Relief Companies Offer Real Help?

Do Debt Relief Companies Offer Real Help?

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Consumers who find themselves in a financial bind often turn to debt relief companies to aid them in the recovery process. With professional assistance, cash strapped consumers may find that debt settlement services can provide the help that they need by extinguishing their debt, lowering their credit card interest rates, or coming up with some other plan to help them manage their finances better.

Debt Settlement

money trapUnfortunately, what consumers sometimes discover is that the debt settlement services don’t always explain what they do for the consumer nor do some understand that they can handle the bulk of these tasks themselves.

For example, if the most significant problem you have is the high interest rate on your credit card, you can get it lowered simply by asking. Lucy Lazarony advises, “A five-minute phone call to your credit card issuer could save you hundreds, even thousands, of dollars in interest charges.” (see Bankrate.com: Want a lower credit card rate? Just ask)

Though there isn’t any reason for a credit card provider to lower your interest rate, if you politely make your request known to them you may get the lower rate. If you find resistance from the bank, explain your financial position. Better to lower your interest rate than to have you file for personal bankruptcy which means they’ll lose everything.

Lump Sum

Another way that you may be able to help your cause is by offering your creditor a lump sum to settle your account. Instead of making monthly payments which may last for many years, you can ask your creditors to accept a lump sum in exchange for paying off your obligation and closing your account.

According to Sarah Rubenstein, debt settlement companies “…often charge high up-front fees, and their strategies can drag down clients’ credit scores and even make their debt burden balloon.”

You think you’re paying off your debt, but there is no guarantee that the settlement company is negotiating with your lenders, sending off payments, and settling with your creditors. Worse, your credit may be trashed for many years to come. (see The Wall Street Journal: How to Fix Your Life in 2009)

Nonprofit Help

Some consumers are attracted to the nonprofit status of a debt relief company thinking that this assures them of receiving good service. Harry Weisbaum urges, “Don’t rely on names or the claim of a non-profit status. Check them out with the Better Business Bureau or your local consumer protection office.”

What’s more, you need to learn what fees are charged including set up and monthly maintenance fees for this service. According to Weisbaum, the Consumer Federation of America identifies a $50 set up fee and $25 monthly service charge as being fair. (see MSN Money: Debt relief deals ‘preying on consumer’s trust’)

Do Your Homework

When hiring any debt relief or debt settlement company (these names are often used interchangeably) you need to find out what services are offered, fees charged, and how this company can help you get back on track.

In any case you can do much of the work yourself including following the debt reduction tips offered on our related SayLending.com website. And, download copies of your free credit reports at AnnualCreditReport.com to make sure that all debt obligations are correctly reported.

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Comments

  1. J. Henry
    J. Henry 17 December, 2009, 00:26

    I guess I’m one of the 98, as my modification has been approved, and my credit is not exactly stellar right now. I would have to believe there is a lot of work being done by banks to facilitate this, based upon the time it takes on hold to speak with someone.

  2. Alisha
    Alisha 17 December, 2009, 03:29

    If you find yourself in a position where you feel you cannot manage your credit card debt without help, consumer credit counseling offers one of the best options for debt relief. It is possible to enter a debt management program and remain current on your payments. You will be able to make just a 2% payment and be debt free in 3 to 5 years without any significant impact to your credit score.

  3. Cathrine Runck
    Cathrine Runck 20 June, 2010, 03:41

    It’s hard to get out of debt, especially since the credit card companies are in bed with big government. Stay disicplined, do your research and choose a plan, and execute the plan.

  4. Teresita Stillings
    Teresita Stillings 7 July, 2010, 00:10

    Credit card debt settlement would seem to be evolving as a realistic solution for people suffering with credit card debt. I have been tracking the debt market rather closely and it is quite difficult to to define what you are getting for the money. I am aware that there are some debt service providers out in the market that provide great services and the debt cusotmers honestly get great benefit, but I’m also aware there are lots of companies marketing their services that are focused on collecting fees and bringing in new members. I am sure this is why there obviosly is new government regulation managing the credit card debt settlement industry. My cousin worked with a debt consolidation business and is actually very happy satisfied with the overall outcome.

  5. DebT
    DebT 16 July, 2010, 16:56

    The key to the process is finding a reputable company to work with, one that puts their clients’ best interests first. There are too many companies out there that are just taking people’s money and not helping them.

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