Many people are in huge debts since the housing bubble burst. If you are behind on your mortgage payments or have other debts and interest payments piling up, you might have been lured by advertisements of debt settlement companies that offer to reduce your obligations considerably. Don’t get fooled by these misleading claims as they could do more harm than good to your financial situation.
These debt settlement companies claim to reduce debts by as much as 60-70 %, which in itself sounds like an impractical and far-fetched offer. Remember that old adage – if it sounds too good to be true, it probably is. The company might capitalize on your desperate situation and deceive you into its scam.
These companies also claim that their settlement processes take into account how things will evolve in future. Such promises are false, as they obviously cannot look into the future, neither your financial situation nor the overall economy. The debt settlement is bound to be influenced by fluctuations in interest rates, changes in economic conditions and decisions of banks, among various other economic factors. The hollowness of the claims of these companies is further highlighted by the fact that they send you a contract that never guarantees any results.
They charge you a fixed amount rather than a percentage of the total savings or the debt amount. This shows that they are not sure about results and are simply trying to make money by getting more and more people to sign their contracts. All these companies do is enroll you into a debt consolidation program.
Such programs may or may not help you, and in most cases, you will have to repay your debt in full with interest. In fact, in some cases your debt might even increase because with a false sense of security you might halt your own proactive measures to bring the situation under control.
Yet another false promise that they make is that the debt consolidation will not be visible in your credit report. The truth is that all such transactions will appear in the report and it will make you lose some of your credibility.
So be wary of these companies. Of course, there are some genuine companies out there, which will help you get out of your debts. Find out all the information about the company, talk to people who have used their services before, and then subscribe to their scheme.
Another thing to look out for is if they ask you to stop paying your bills so they can gain leverage over your creditors to get a better settlement offer on the payoff balance. This will hurt your credit even more.