Even with financial regulators coming down hard across the country on usurious credit negotiation companies, many people are still handing over thousands of dollars to settle outstanding debt. Debt settlement companies are almost always an inferior option to other debt settlement services and professionals.
Debt settlement companies charge large fees
Many debt settlement companies will require you pay a service fee up to 25% of the debt you owe. This money does not go towards paying off your debt, and must be paid to the debt settlement company before they begin to pay down lenders for your debt.
If a settlement company gets a lender or collector to agree to accept 50% on the original debt owed, and your debt company charges you an 18% service fee on your debt, you are really paying 68% for the debt company’s services. This fee can take a year or more to pay off, prolonging the period you must wait before you can begin rebuilding credit.
Debt settlement companies have no legal recourse
Most debt settlement companies are not legal professionals. In fact, once a debt relief company contacts a lender, the lender may accelerate the collection process. This may mean turning your debt over to a debt collector or suing you in court.
Because debt settlement companies aren’t often comprised of lawyers they will abandon you the moment legal action is imminent.
The only thing you really get from most debt settlement companies are hefty fees and empty promises. There are many non-profit debtcounseling services that can help you reach a debt settlement. Lawyers and accountants are often a cheaper alternative, too.