These companies sound “too good to be true” when they promise to cut your debt by more than half. (For ex: from ,000 to only ,000), but what these companies tell people is that credit card companies are happy to at least get something UP FRONT from customers who simply might otherwise never pay off their credit card debt at all. I’m inquiring for a friend, but it seems to me that this is just too unbelievable to not be a scam? Major radio programs & TV programs are “singing the praises” of these companies, but I still must ask “What’s the catch”?
KIF, 790, 870 radio & TV have recommended these types of companies (that’s why my friend believes this must be a legitimate offer). She called the 800 # & spoke to Mr Sean in a Texas office. She asked me to call the BBB for her, but I have found that Y/A people frequently know a lot about a lot of things (so I decided to post this question out here as well).
It’s unbelievably simple: Mr Sean said, “We will pay your credit card company 00 & then you will make monthly payments to us”, but my ex says if something sounds to good to be true it usually is.
Wow-you guys are GOOD, but this is confusing. “Sean” from X company told my friend that X company will pay my friend’s credit card company x amt of dollars (for ex 00) to her credit card company & then she makes payments to this “X” company-sounds so simple,right? My friend has AMAZING CREDIT. She’s just trying to make her life easier is what I guess you would say? She always makes all her payments in a timely manner, but (of course) when your favorite radio host ENDORSES something that sounds fantastic, you will jump at the chance to do that “fantastic” thing for yourself. (Who wouldn’t want to more than cut in 1/2 the debt they owe to a credit card company, right?)
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Mon, Apr 19, 2010
April 19th, 2010 at 7:02 am
Others have already commented on Debt Settlement companies and how the process itself works. Yes you can signficiantly cut your debts, but there are MANY downsides. Here’s my "two cents" based on having gone through Debt Settlement in 2009:
1) Your Credit Rating will take a hit since settled items are usually reported as “Paid-Settled”. How bad of a hit depends on whether or not the debt in question has “charged-off” yet, but either way it will take a hit.
2) Most Creditors will not negotiate a lump sum settlement until AFTER you are in default, so basically if you want to settle, you have to stop paying before they will even consider settling. This puts you at risk of being sued (see Item 6).
3) Once you default, you will get CONSTANT calls and letters from the Creditors. Once they give up, a Debt Collector will do the same. Be prepared for the onslaught and DO NOT DISCOUNT THE PSYCHOLOGICAL TOLL THIS WILL TAKE ON YOU! If you’re like me and are not used to being unable to pay your bills, each call and each letter is like a punch in the stomach, reminding you that you are incompetent and can’t pay your bills!
4) Debt Settlement can be done on your own. I started 2009 with a Debt Settlement company but eventually fired them when I realized I could do it on my own. There are many resources here in Yahoo Answers that can help guide you. Do lots of research! I recommend reading the questions on this topic that CatDad, Dixie Darlin’, and Bdancer222 have answered; based on my experience with Debt Settlement, they are very knowledgeable and know what they’re talking about.
5) Do not hire a Debt Settlement company! It can be done on your own with the same or better results, and you’ll save a lot in fees! Generally, they charge 15% of the total debt you enroll in the program, spread out over 12 or 24 months. The fee itself makes it VERY DIFFICULT to save anything for settlement depending of course on how much debt you enroll and how much you make.
6) Be prepared; you can get sued! There is at least one Credit Card company I know of (Discover) that will likely sue not long after you’re in default. AMEX was very also very aggressive in my case (they’ve sued me on two of the four accounts I had with them).
Bottom line: don’t go this route unless you absolutely have to, but if you do have to go this route, arm yourself with research and knowledge and know that it CAN be done!
April 19th, 2010 at 7:02 am
While not explicitly a scam, debt consolidation is a risky process. It doesn’t matter if such a company has a good BBB rating or your local radio station recommends them…any process that involves deliberately defaulting on your credit cards to settle for less will always be risky and the consequences of a failed settlement are very unpleasant.
When you sign up with a debt consolidation firm, the program involves deliberately ceasing payments to all your creditors to force your accounts into default to attempt settlements for less. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator’s fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating. You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.
Consider this: If someone owed you $10,000 and the person abruptly stopped making monthly payments to you and told you that they won’t pay you back unless you settle for $4,000, then you’d probably be steaming mad, right? This is exactly how these firms operate…Your creditors might not play this game and they’d sue you instead.
April 19th, 2010 at 7:02 am
I’m not entirely sure if you are asking about debt settlement or credit counseling. There is a "catch" either way your friend would go. They will both affect credit negatively. Credit counseling is akin to Chapter 13 bankruptcy, as far as lenders are concerned. While the debt all gets paid off, there needs to be a lot of time after it is completed before attempting to get any money from a lender. Debt settlement will show up on the credit report as well, and it will negatively impact the credit scores. The account will show as settled for less than original amount owed. Future lenders will be much more leary about lending in that case. Remind your friend that it will stay on the credit report for 10 years. On the other hand, if minimum payments are unable to be met currently, and the late payments are piling up, one of these options may be the best bet to get your friend some piece of mind, and back on the road to recovery. Just be sure to have your friend learn everything possible before making a decision.
April 19th, 2010 at 7:02 am
Forget those debt settlement companies. They take your money and let all your accounts go 90+ days past due. Then they start making lowball offers … that is IF they do anything at all. Not only does this trash your credit, but most credit card companies refuse to play and will immediately sue you. The settlement company won’t be around to help with the lawsuit.
Just because radio and TV stations accept the advertisment, does not mean the shows actually endorse the company. These kind of companies love to advertise on consumer related shows and sites. Because folks ASSUME they are being endorsed. Most shows have no control over who advertises.
If you are having problems keeping up with your credit card payments, it is much smarter to contact a NFCC credit counseling service: http://www.nfcc.org/. These are legit, non-profit companies that offer debt management programs for a nominal fee. They negotiate lower interest and payments so that you can pay off your debt. When you complete the program, you will have decent credit.
April 19th, 2010 at 7:02 am
Yes you can! Yes you must!
You have two options to solve this situation: you can negotiate yourself with your credit card company or you can get help from a third part counseling company or specialist which can negotiate on your behalf. Either is your choice, is essential to know what you expect and make a serious commitment to eliminate the debt.
>> Learn more on how to eliminate your credit card debt.
Facts about your credit card debt
To negotiate your credit card debt yourself or take a specialist to negotiate on your behalf, you need to know five essentials informations about your credit card. They are in your monthly statement:
1. How much is your debt with the credit card issuer.
This is your outstanding balance.
2. Current interest rate and APR (Annual Percentage Rate).
You may find that you are paying different interest rates on different portions of your outstanding balance. If so, your statement will show those individual interest rates as well as the APR which reflects the total amount of interest you are being charged over a one year timeframe.
3. Current minimum monthly payment on each credit card.
This quantity is a percentage of your outstanding balance, normally three to five percent and will increase or decrease each month based on charges or payments to your credit card.
4. Average amount of finance charges you pay monthly on each credit card.
How to negotiate credit card debt reduction
Regardless of who does the negotiation, you can try to reduce the amount of debt by either:
– Reducing the current debt
– Reducing the future debt
Reducing Current Debt
If you are not able to make the minimum payment you can ask the credit card issuer for helping you with one of these two options:
– Lowering your monthly payment for a short period time to give you a chance to get back on your feet financially, or
– Set up a new payment plan for 36 to 48 months during which you can spread your existing debt. This can lower your monthly payments and allow you to pay off all the debt with a lower interest rate than you would have been charged without the repayment plan.
Reducing Future Debt
The smartest strategy to reduce future debt is to put your credit card away, and start using only cash. You don’t need to cancel your credit card account. You want to keep it open since that it will show that you have available credit, which will help your credit score. This is important if you have several debts and you need to be in a good position to negotiate a lower interest rate. Remember to maintain a good payment history.
Also take a look in this video! It contains very helpful information.
Additional resources about credit card debt
Knee Deep in Debt Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car? Credit card companies are over you? You’re not alone. Many people face a financial crisis some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn’t have to go from bad to worse.
How credit card debt is affecting America Credit card debt has become such a problem in this country that some credit card companies are "character profiling" in order to deny consumers higher credit limits. Unless you have successfully filed for bankruptcy recently, federal laws allow for credit card companies to come after you if you owe them money. Initially, they must either come after you themselves or hire a collections agency to approach you about your debt. They can also report your missed payments to the three major credit agencies as well. If you still refuse to pay them, they are entitled to take you to court to try and force you to pay your debt. At this point, chances are you’re not just being stubborn: You’re legitimately facing a problem that could affect you for years to come.
What people on the Blogs are talking about this:
Debt Help – Where to Turn
If you are a family like many around the world right now and are battling debt, it might be time to get help. Comprehensive Debt Management is proud to help with our free blogs and forums so that people just like you can share what has worked for them. The fact that you are here today reading this article is a great first step. It is not easy to ask for debt help. Let’s look at some of the options you may have.