With the current state of the economy, unemployment and the inability to obtain cheap or easy credit to refinance debt and lower payments, I often get asked about what debt relief solutions I recommend.
These days, there are debt relief solution providers offering debt relief programs for just about every variant of debt that exists. There are debt counseling companies, companies that promise debt relief (like consumer credit counseling), credit card debt relief brokers, etc. The truth of the matter is that none of them provide debt relief, credit card debt relief or a real debt relief solution. The only place a debt relief solution is going to come from is YOU.
While it is true that some of the “legitimate” companies may reduce some of your credit card debt, they are not doing anything you cannot do yourself. And, oh, you can actually negotiate a better deal for yourself than they can. Why is that?
Let’s take a closer look at some of the debt relief programs that promise credit card debt relief. Many of them, like the myriad sham and scam artists that go by the name Consumer Credit Counseling and position their marketing to have you believe that they are non-profit companies are nothing of the kind. They promise credit card debt relief and even have testimonials from satisfied clients. Here’s the real deal, they are not non-profit organizations. No one works for free and they certainly couldn’t afford all of that TV advertising they do if they weren’t making money. So, where does the money come from for their debt relief programs and how is it that they have testimonials from clients claiming that they have personally experienced credit card debt relief?
Depending on the company, they either charge you a big fee up-front or make money from the spread on the debt they restructured. In other words, let’s say they successfully lower your interest rate from 29.9% to 19.9%. Sounds like a great deal and depending on your personal situation, it may be. Here’s the catch, what they have done is actually negotiated an interest rate lower than 19.9% and when you make your payment to them, this difference becomes their compensation.
Depending on your skill level renegotiating credit card interest rates and your available time, it may be worth it to have them handle the negotiation. Unfortunately, most people don’t know the first thing about renegotiating with creditors and so they seek debt relief solutions from debt relief programs. The key is to ensure that you are dealing with a legitimate debt relief solutions provider. There are many that are nothing other than total scams.
When seeking debt relief solutions, you need to understand the cost of the debt relief programs you are paying for, the time frame expected, what type of debt relief help can you expect and what impact there will be to your credit report. What you want to avoid is anything derogatory being reported to your credit report because you used a debt relief solution, debt counseling, consumer credit counseling, credit card debt relief solutions or other variants of debt relief programs.
If you have charged off credit cards and are looking for a credit card debt relief solution, there are legitimate companies that can negotiate a reduced settlement and/or payment plan as part of their debt relief solution. However, there is one more thing you want depending on what your situation is:
1. Complete removal of the trade line from your credit report if the credit card was charged off and you are paying the settlement amount in full. You need to get this in writing from the credit card company prior to paying them and the letter needs to have the following information on it on the company’s letterhead, otherwise, it isn’t a true debt relief solution as it will leave you with derogatory credit unnecessarily: Statement indicating they will remove and stop reporting the derogatory trade line upon payment in full of the settlement amount, representative’s name and phone number (be sure to call to make sure it is legitimate and you can reach them), account number and balance.
2. If the credit card debt relief provider has negotiated a payment plan on a reduced amount, you want the account re-opened and the new payments reported to the credit bureaus or the trade line completely removed. The preference is to have the payments reported so you can recover from the derogatory credit.
So, the answer to our tagline question asking if debt relief programs are a great debt relief solutions or a total scam, is, it depends. It depends on your situation and the debt relief solutions provider that you select. If you select the wrong one, it can be a total scam. If you select the right one, with the few minor tweaks we advise here, they can be a great resource and save you tremendous time and money.
[ad#ad-1]
