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Between credit cards, monthly
bills and the general costs of running a family, you may be
falling behind on payments and falling into debt. Like many
Americans, you might be considering a debt settlement
company that combines your bill into manageable monthly
schedule. But you need to be careful when you choose a debt
consolidation service, because there are many false front
companies you can damage your credit and leave you farther
in debt that you were before.
First, you need to know that
debt settlement companies are not the same as debt
consolidation. A debt settlement company uses a long-term
approach of savings to absolve your creditors by saving your
monthly payments in a trust fund and paying out to one
creditor when there is enough money. If you have only a few,
small debts, this may work for you, because you can get
temporary relief from creditors by hiring a debt settlement
company. But if you have multiple or large debts to
companies, they can sue you for the payments before the
trust account is full. Additionally, debt settlement
companies take their share up front, charging a hefty
“account set-up” fee just to get you started. This fee
doesn’t entitle you to important information, like the fact
that debt settlement companies don’t stop the interest or
late fees from accumulating on your bills, so you may find
that you owe more than the original bill because you waited
with a debt settlement company.
Instead of signing lengthy
settlement contracts with a debt company, which can take
three to five years to full pay off, consider negotiating
with creditors yourself. Depending on your credit, creditors
will usually agree to stop the interest and late fees from
procuring on your account and will allow you to make a
smaller monthly payment than you ordinarily would. This can
save you thousands in “set-up” fees and lots of time. If you
do decide to use a professional debt service, be sure to
thoroughly consider their service plans to see if you can
afford all fees and time schedules that they propose and
decide whether they are the right solution for your money.
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