Is Debt Settlement Companies Bad?

Answer 1

For the most part, settlement and repair companies take their fees up front and trash your credit. Typical method is to stop paying for several months then offer low ball settlement under threat of bankruptcy.

A much better idea to to work on cleaning up your credit on your own. Set up a strict budget. Get rid of all the extras -- cell phone, eating out, new clothes, premium cable and internet, etc. Take every penny you can squeeze out of that budget and put it on the highest interest rate credit card, while making minimum payments on the rest. When the highest interest rate card is paid off, move to the next till all your debts are paid off.

You can also look for ways to bring in cash -- garage sale, collect alum cans, get a second job.

If you really work at it, you can get out of debt within 2 or 3 years. Not only will you learn good financial management but you'll have a nice on time payment record which will give you a decent credit score.

Answer 2

Yes they are bad. They don't really help your credit and say it would take you 3 years to pay your debt back on your own, with a settlement company it would probably take 4 to 5 to pay it back. Keep in mind they are in business to make money so they will be making money from you. You can do everything they can do for you. All they do is call your debt collectors and work out a price under what you owe. You can do the same thing just by calling them. Don't waste your money on it just do it yourself.

Answer 3

Debt settlement, also called debt negotiation, is a newer form of debt consolidation help that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years - so they are a short programs with low monthly payments that can save you the most money while avoiding bankruptcy.

It is important to keep in mind, however, that during the life of your debt settlement program, you are NOT paying your creditors. This means that a debt settlement solution of debt consolidation will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Bankruptcy. The trade-off here is a negative credit rating versus saving money.

Visit http://www.bills.com/debt_relief/ for more information.

Answer 4

Yes they are!! Your credit will be ruined even though they will try to convince you otherwise.

Your best option is to sit down and think how you got yourself into this situation. Did you live above your means? Did you do something stupid? Be honest with yourself and eliminate the source of your debt. Sell your luxury car and buy a 4cyl lawnmower. Live in a one bedroom apartment and cut your creditcards in half. Dont buy anything unless you can pay it upfront. Have other expenses you dont need? stop them. You dont need internet or cable if can afford them. Sell your jewelry. Stop shopping food at Wegmans if you can afford it.

Learn how to balance a budget and save an amount per month to pay off your debt. Its YOUR debt. nobody else will pay it for you. And finally get a second job. The extra hours will bring you some more income and reduce the hours you have to spend money. Probably what got you where you are now.

Answer 5

Fewer and fewer creditors will work with a settlement these days. The debt negotiation industry is coming under much scrutiny.

One of the things that they kind of gloss over is the fact that you have to claim money saved on your debt as income to the IRS.

Example. If you have $20k in debt- and they negotiate a savings of 50%- you will have to claim extra income of $10,000 and pay taxes on that.

Courtney Kostelecky
Founder DebtFreeNews.com

Answer 6

i do not say they are bad -- i will say for most folks can do the same thing with out paying the up front fees and it will not hurt there credit scoure as bad!!!!