The Downside of Debt Elimination Programs

If you are in debt, there is a good chance that you have considered some debt elimination programs at some point. Many of them advertise heavily and promise some pretty amazing things. However, there are a few drawbacks to using their services. Here is the downside of debt elimination programs.


One of the main bad things about the industry is the many scams involved. While there are some good companies out there, there are many bad ones as well. Some of them have been known to take people's money and not actually do anything to help their debt situations. They just take the money and run. 

Before getting involved with this type of company, you need to do your best to make sure that it is legitimate. Check online reviews to see what others have to say about the company. If you find a fair number of negative reviews, you can be fairly confident that you should not do business with it. 


Another drawback to using this type of service is the costs that are involved. You are in debt, and you want to apply any extra money that you have towards retiring it. However, the debt elimination program is going to take a percentage of your monthly payment for itself. This can prolong the debt elimination program, as you are not paying as much as you can towards eliminating the debt. Many times, such a program will collect a fee for things that you could be doing on your own. 

For example, many people pay an extra $30 to $50 a month to their debt elimination program just to implement a debt management plan. However, they do not realize that they can set up a debt management plan on their own. They can call the creditors and negotiate the same way that the debt elimination program can. Then they can send out their own payments to their creditors instead of allowing someone else to do it for them. Therefore, they are spending extra money every month that they do not need to spend. 

Credit Score

In addition to the costs, it can also hurt your credit score. When you join a debt elimination program, the credit bureaus will most likely lower your credit score as a result. As part of this type of program, you will typically lower the interest rate that you pay on all of your accounts. Therefore, you will not be paying off the account as you originally agreed to when you signed up for it. Any time that you alter the terms of a credit agreement, the company is going to report it negatively to the credit bureaus. While it is not devastating to your credit in the long run, you will have to rebuild it a bit to get to where you were before you joined.

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