Review debt negotiation programs, debt negotiation firm and debt negotiation companies promise to settle your debt for a pennies on the dollar. Learn how to settle your unsecured debts, Today!
Debt management programs, you've seen the television advertisements, for non profit debt negotiation organizations that promise to settle your debts for a fraction of the money owed, with no negative repercussions on your credit score.
Nearly all of the debt negotiation companies state that by using their program, you can avoid the stigma of a bankruptcy, and get on with your life.
Sounds too good to be true, doesn't it? If that's the thought that crossed your mind, you're dead to rights - it is too good to be true, though it's not a scam. Let's analyze the claim steps point by point to see what's involved.
The first is the implication that - non-profit - means dedicated to public service in practice, several states have loose regulations for non-profit organizations, such that they can be turned into positive revenue vehicles.
Provided certain requirements of internal governance are met, and certain paperwork is filed, a non-profit organization or corporation can be quite an interesting tax shelter for a company that maintains no physical products or production.
In practice, these companies are almost all organized in Delaware or South Dakota, as non-profit organizations and are organized in that way solely so that you'll hear non-profit and think credit counseling service rather than debt negotiation programs.
Second, debt negotiation programs promise to settle your debt for a fraction of the money owed. What they aren't telling you is how this actually works. Debt negotiation companies offer to set up a special account that you pay into, while they pay your creditors off.
However, your creditors are under no obligation to treat this as a legitimate payment of your account; the debt negotiation programs are holding your money, earning interest on it, and paying off your creditors, who may very well be charging you late fees and penalties on the existing account!
Even worse, debt negotiation companies often charge high up front fees, or monthly or annual fees, or a percentage of the money you saved. This is how they make their money (along with the interest on the accounts set up by other debtors they're negotiating on behalf of.)
Furthermore, because your creditors are obligated to inform credit reporting agencies that you're in arrears on your debts, this can be even worse for you than a bankruptcy.
Read ANY terms and agreements carefully and with an eye towards where the debt negotiation company wins by leaving you out to dry.
While there are legitimate debt elimination programs and debt negotiation programs, the loopholes that allow them to exist also allow them to become money factories for their owners, even with the heavy regulatory burden they face in most states (Again, South Dakota and Delaware are the two primary exceptions.)
When evaluating the claim of debt negotiation programs, look for anything that sounds - too good to be true, and be sure to check out the company with the Better Business Bureau, and with a credit counselor.
In the mean time, take the time to accurately assess what your expenses are, and build a budget that meets them, and leaves you some cash left over to pay your debts. Leave the cards at home while you're paying them off, and pay cash for everything. Paying cash is the easiest way to break the buy now, pay later mentality that leads to so many consumer debts in the first place.
Focus on living on 90% of your income, and set the 10% aside to paying off your debts, and then to building a solid savings plan for the rest of your life. While some debts are considered good - such as college loans, mortgages and home improvement loans, avoid using credit to make day to day purchases.
Indeed, if you can make the discipline to do so, it's quite instructional to take out your receipts every night and write down what you spent, on what. Make a log, and look for things you can eliminate, or replace with free offers.
For example, instead of going out to the movies with the family, consider going out to the park. Most cities have a free concert series - consider using that for your family entertainment package.
Stop eating out, and start packing a lunch. Consider this - the sandwich you buy at Subway for $7 with chips and a soda would cost under $1 to make at home and take to work. Do that for five working days a week, and that's $30 a week, or $120 a month. That may make a significant margin right there.
Join a carpool or take mass transit to work to reduce your gasoline expenditures. If you smoke, do your best to cut back your habit - at the price of a pack a day, you're spending an average of $150 a month on cigarettes.
Do take the time to look into credit consolidation, and talk to a legitimate credit counselor, preferably one recommended by your local municipality.
No matter how staggering your debts are, it's always possible to dig your way out from under it with a good debt elimination program, without having to go through debt negotiation programs.
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