Debt settlement companies: what to do and what not to do

There are two types of debts, one is feelings or emotions and the second is cash or money which has to be paid in future. The Debt companies are not liable to help with the first condition but the second condition can be helped. It is needed to understand that credit card bills, medical bills, late payments and overdue are stacking one by one and creating a huge mountain of debts. There are many agencies that are offering assistance help with ongoing debt. They are also claming that they can settle things in a night but it is not true. Every debt settlement needs a different approach and still a person has to pay.  The Process of the company is having a proper negotiation with creditors and trying to convince them to lower the interest of the debt. Another way is to consolidate the debt to single down payment.


Option of services available for Debt Relieves

For settling the debt there are various options that a person can utilize. It is necessary to understand what services are to be taken. Following are some of the options:

  • Settlement of Debt: This process includes hiring professionals to contact creditors and hoping the negotiation can be made for the lower payment amount. There is also no guarantee that the settlement will be a success. No settlement company can ask for fees in advance.
  • Consolidation of Debt: The main goal of this process is to take a loan which has lower rate interest. With this loan all debts are paid and then the person only has to pay lower interest only to one debtor.
  • Management of Debt: In this program the debt companies takes a monthly payment from the client and manage it properly to make payment on clients half to creditors. This option of debt paying does not have negative effects of credit methods.
  • Bankruptcy option. This is one option which is rarely recommended but this option can be taken. Bankruptcy helps a person to officially prove that they are not liable to pay. There are legal formalities to prove bankruptcy.

Risk that is involved in Debt Relief program

Looking at the positive aspects but there are also chances of having risks in taking options for debt management. There are chances of having a negative affect towards credit. If the companies are not negotiating properly then there are chances that creditors might take some action. It is always better to make the first talk as seeing the company coming for negotiation is not liked by the creditors.  Many companies claim that they can settle a debt in less than four years. But still remember that payment is still made to debt settlers for maintenance charges. This would certainly result in paying more and you can still be in more debt.

Rules and Regulations

The rules and regulations at created by Federal Trade Commission (FTC) and these have to be explained:

  • Fees in Advance: The fees are not to be paid in advance or before a settlement of debt. The company can only charge fees when the creditors agree to settle. There are also chances in which a company asks charges for monthly payments and this is legal.
  • Legal Disclosures: It is necessary to tell about the cost and fees associated with it. How many days or years it will take. The amount of money to kept aside after the settlement. How much of the negative impact it will have to your credit.
  • Truthful claims: The claims that are made should be clear and understandable. Making untruthful claims are against the legal process of FTC.

When looking for settlement companies

Always look for those companies which follow rules and regulations of FTC. Search for the company that is able to reduce the debt and still charge less. Also charging small fees for a small portion is still favorable.

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