Negotiate credit card debt

Rising costs and layoffs have meant that there are now more people in debt than ever before and some of these people are turning to debt settlement companies, also called debt negotiation firms, in an attempt to solve their problems. However, before you sign your name to anything you should do some research and take care not to get caught in the scams that are out there.

It is all too easy for the novice to get confused between debt settlement and debt consolidation; they are not the same things. Many debt settlement companies will talk to you about setting up an account and then charge you hundreds of dollars for doing so — thereby adding to the debt that you already have. Debt negotiation services will also charge you a service fee every month, the amount varies depending on the company and on the amount of money that you owe.

Most debt settlement companies do not make monthly payments to your creditors. The money that you give the company is put into a trust account, then they negotiate with the people that you owe money to and when there is enough money in the account pay off the full debt.

You may owe a lot of money on your credit cards and if you stop paying then the credit card companies will add late payment charges as well as the interest accrued on the debt. A good debt settlement company would contact your creditors and try to get the interest frozen so that you could pay off the debt, but most of these companies don’t do that.

If you do decide to use a debt settlement agency then you should ask exactly what they are going to do for you before you sign anything. Many of them don’t make it clear exactly how they operate. They don’t ask for interest to be frozen for example, and they don’t always contact your creditors.

If they don’t contact the creditors and neither do you, then, while you are waiting for your payments to accrue in a trust account so that they can be paid, your creditors will take you to court and they could have your wages garnished. Meanwhile, you are trying to pay off the debt, and pay a monthly fee to the debt arbitration company thinking that you are getting out of debt. In reality you can end up deeper in debt.

Before you get involved with any debt settlement company try contacting your creditors and ask whether they will freeze the interest so that you can pay off the debt more quickly — most will do this for an agreed period, giving you the chance to at least reduce the debt. Some debt negotiation companies know very well that the money they are taking from you every month for your creditors will not cover the debt — especially once they take their payments off of the top.

This is not to say that all debt settlement companies are out to fleece you of your money when you can least afford it, but it does mean that you should take great care that you know what you are getting into.

By: Paul Sarwana

Tags: Amount Of Money, Contact, Credit Card Companies, Credit Cards, Creditors, Debt Consolidation, Debt Help, Debt Negotiation Services, Debt Settlement Companies, Layoffs, Novice, Payment Charges, Scams, Settlement Agency, Settlement Company, Trust Account