5 Debt Settlement Scams to Avoid

Beware of debt settlement scams. There is a trend among agencies that take advantage of individuals who are seeking relief from their overwhelming debt. It is important to be aware of these common red flags because they can help you to determine whether the companies you are considering are debt settlement scams or legitimate offers.

5 Major Debt Settlement Scams to Avoid

Advertisement includes language expressing, "We will help you in exchange for an upfront fee." These fees can be several hundred dollars and they are collected before any services are rendered. Scammers do not help clients manage debt or negotiate with lenders. Fees are seldom refunded even though no results are produced. The Federal Trade Commission (FTC) has reported one company charging a monthly fee for services they did not perform.

Advertisement promises to erase all or most of your debt, e.g. "We will cut your debts in half." While it is theoretically possible to negotiate with lenders in order to reduce the overall amount owed or to reduce interest rates, it is unlikely that this will be successful every time with every lender. These types of results cannot be guaranteed.

Advertisement promises to clean up all of your credit problems quickly "We will get rid of all your credit problems within months." Good credit history takes time to develop. While credit may improve over time, it is impossible to erase delinquencies from your credit history in less than seven years. Credit repair is a process and it will take time. Debt settlement companies are also different from credit counseling agencies that focus on advising clients in developing debt management habits that can repair their credit. Debt settlement firms just try to work with lenders to lower your overall debt and do not have the power to wipe your credit clean or stop creditors from calling.

Advertisement promises thousands of dollars in savings. The FTC reports that one company who made this claim charged up to $600 for their services and advised clients to pay more than the minimum. The advertised savings were based on projected possible savings gained from this action over many years and not from the negotiated reduction of overall debts or interest rates.

Advertisement lacks the details on how they will manage to reduce your debt. Poor debt settlement tactics can actually do harm to your credit rating. For example, some companies will advise clients to stop paying there bills in order to leverage negotiations. Don't believe claims of special relationships with lenders that will somehow give you an advantage in negotiating debt reduction.



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