Thursday, August 4, 2016

Credit Consolidation Tips

You work with a debt settlement company in order to in order to have a professional act on your behalf with your creditors to help reduce your debt balance.  There are debt settlement companies who claim to be able to reduce your debt by as much as 75%.  You will make your search for debt settlement companies easier once you understand what they are and what they do.  If you know what to look for, your search will be easier, and you will find a  good, reputable debt settlement company, not a scam.

You can use the following ideas to eliminate the companies you do not want to work with.  First of all, make sure you understand that debt consolidation companies are for you if your debt is getting out of hand and you may be heading towards bankruptcy. Debt settlement is not just an easy way out from under your bills so you can just incur more debt.  

Most debt settlement companies charge a fee to perform these services for you. This will include a fee to set up the program, and then a fee to maintain your payment schedule. The principal behind a debt settlement company is that they collect money from you and set up a trust account. While funds are accumulating in this account the company will negotiate with your creditors. They will usually start with the loan or debt with the worst terms and then they start to disabuse funds out of this account to settle this debt.  Then they move on to the next one, etc.  They will charge you a settlement fee on any funds they are able to save you, a percentage of those savings.  During the period you are funding the trust fund, your debts will be accumulating late fees and interest charges, so the overall balance on the debt will increase. A legitimate debt settlement company will charge you on the original balance, not the balance after all of these charges. You should not deal with a company that wants to charge you on the higher balance after these fees.

In your search for a debt settlement company, you should try to find one that will offer you a personal credit counselor who will be able to advise you and then give you ideas about staying out of debt in the future.  You can probably get an initial consultation for free, to decide if you want to work with a debt settlement company. Usually the most honest and reliable companies are the ones who will offer this free consultation, since they have nothing to hide and will only earn their fees once they start working with you.