|
|
|
Debt Consolidation - What it is and how it works
What is Debt Consolidation?
Debt consolidation in the UK is the process where a debtor takes
out a single loan to pay off other existing loans. This can be
done to secure a lower interest rate, and hence make lower
monthly repayments, or to...
Debt Relief -- Why Most Programs Have A 75% Failure Rate
Debt consolidation, equity loans, credit counseling, debt management plans, even Chapter 13 bankruptcy – it doesn't matter which of these debt programs you're talking about. They all suffer from one fatal flaw, the number one problem that causes...
How Businesses can Stop Wallowing in Bad Debt and Prevent it in the Future
Did you know that bad debt has reached alarming rates with US business owners and that most creditors don't know how to avoid or prevent it?
"Become the Squeaky Wheel", a new book just published, explains that getting customers involves more than...
Secrets to why debt reduction is so vital for your financial health
Why debt reduction is vital for your financial health Living with debt is never a good idea if you want to make long-term financial plans. Every cent you use to service debt is money that could have been invested in your future. Investment is...
Understanding how a Debt Consolidation Program works
You have finally decided that you need help with your debt and you have made a great decision to take a load off your shoulders. Debt is so stressful that it can even affect our health and certainly our enjoyment of our daily life. Understanding...
|
|
| |
|
|
|
|
|
|
Shocking Facts - What Debt Settlement Companies Don't Tell You
If you're thinking about using a debt consolidation or debt
settlement service to help you get out of debt faster and
save money on your monthly payments, make sure you do your
homework before choosing a company. There are definitely
shams and scams out there.
First let me say that debt consolidation is *not* the same
as debt settlement/negotiation, which most people don't
realize.
Debt settlement companies charge hundreds of dollars as an
initial "admin fee" to set up your account, plus a monthly
service fee. The fees vary depending on the company and the
amount of your debts.
Such companies take your money every month, but don't make
monthly payments to your creditors! Instead, they put it in
a trust account, negotiate your debts with your creditors,
then make a lump-sum payment when there's enough in your
account to pay a creditor in full.
That can take *years* depending on the amount of debt you
have with each creditor. Meanwhile, you can be sued by your
creditors and your wages can be garnished! (Or just don't
make payments to your creditors. You'll end up in the same
spot without paying someone to help you get there!)
Settlement companies don't ask your creditors to stop all
interest, late fees and overlimit fees from accruing. That
means while the negotiations are ongoing, your bills will
continue to grow! So if you're sued and a judgement is
brought against you, you'll owe more money than before!
And shoddy companies, which there are alot of, don't tell
you *any* of this up front. I call it "getting permission
by ommission" because they simply don't tell you how their
program works *before* you sign an agreement with them. Or
after, for that matter. But if you ask the right questions,
eventually you'll figure it out. (Or when the crap hits the
fan. Whichever comes first.)
Let me give you an example of how debt settlement works.
Let's say you have $20,000 in unsecured credit card debt.
You owe $10,000 to one credit card company, $6,000 to
another and $4,000 to a third. You agree to a 5 year plan
where you pay $250 a month to the settlement company.
(After all, $250 a month for 60 months is only $15,000, so
you're saving $5,000 and you'll be debt-free in 5 years,
right?)
The admin fee will cost you $750. Your first 3 monthly
payments go towards that and nothing gets put into your
trust account until your 4th month.
The settlement company keeps $50 of your $250 payment each
month for the service fee. That means $200 a month is being
added to your trust account.
Most debt settlement companies claim to be able to
negotiate your debt for about 50% of what you owe. So let's
use the lowest credit card debt as an example.
If you owe $4,000 and your creditor agrees to accept $2,000
as payment in full, it will take 10 months at $200 per
month to have enough in your trust account to pay off just
that one credit card.
But remember, your first 3 payments to the settlement
company only paid the admin fee. That means your first
credit card settlement is 14 months *after* you started
sending them money.
So what's the problem? It's
simple. Your creditor won't
agree to accept half of your actual debt unless, or until,
it can be paid in full. Otherwise, you're expected to make
your normal monthly payments.
Since you don't have $2,000 in your trust account, and you
won't have it until more than a year after you stopped
paying your creditor directly, they'll probably take you to
court and request that your wages be garnished long before
you have that $2,000 built up.
And what about your other creditors? Well, they'll be
waiting even longer to get their money from the settlement
company. The $6,000 debt will take 15 *more* months to pay
off, assuming your creditor waits that long and agrees to
50%. And that $10,000 bill? You do the math.
On the other hand, if you signed up for a 3 year plan with
the settlement company, your debts would be paid off
sooner. But, the question is, will your creditors wait that
long? Probably not.
The facts are, you can negotiate with your creditors
yourself. Most will agree to take a smaller monthly payment
from you and stop all interest and fees from accruing. And,
of course, you'll save thousands of dollars in fees to a
settlement company.
Before signing up for any service, please be sure you check
out the company thoroughly. And don't let the words
"non-profit" fool you either. Alot of debt settlement
companies claim to be non-profit.
Going back to the example above, if you pay them $15,000
over a 5 year time frame and they settle your debts at half
of what you owed, they'll make $5,000 from you. I'd call
that a profit, especially since they might not have
actually helped you in any way.
Most companies will allow you to cancel your account and
get a refund of what you've paid, less the non-refundable
admin fee and the monthly service fees. If you feel you've
been mislead about their program, don't hesitate to argue
til the cows come home. File a complaint with the Better
Business Bureau or hire an attorney if you feel you're
getting nowhere.
You can visit the Better Business Bureau's website
(http://www.bbb.org) and find reports on hundreds of
companies. Here's a small listing of companies that have
poor reputations with the BBB:
National Consumer Debt Council LLC - Irvine, CA (A.K.A.
NCDC, United Consumer Law Group)
Financial Rescue Services - Burbank, CA
Debt Legal Services - Anaheim, CA
American Debt Relief - Los Angeles, CA (A.K.A. A M Debt,
American Debts Relief, Debt Relief)
Please be very cautious when choosing a debt help company
and ask lots of questions before agreeing to anything. If
you find they're evading your questions, run fast and run
far. There are reputable companies out there, so keep
looking until you find one.
ABOUT THE AUTHOR
Denise Hall is the owner of Home Business on a Budget which
specializes in tools and resources for your home business
needs. Visit http://www.home-business-on-a-budget.com today.
Get weekly articles, tips, information and resources here:
http://tinyurl.com/4f9k8
This article may be reprinted in its entirety with this
resource box included.
|
|
|
|
|
| Advertisements Promising Debt Relief May Be Offering Bankruptcy |
| Cautions consumers about ads in newspaper, magazine and telephone directories that offer quick fixes for debt problems. |
| www.ftc.gov |
|
| Welcome to Debt Relief International |
| Welcome to the web site of Debt Relief International. |
| www.dri.org.uk |
|
| Debt relief steps, your free guide to debt help. |
| Articles on debt relief, and credit management and repair. |
| www.debtsteps.com |
|
| Factsheet - Debt Relief Under the Heavily Indebted Poor Countries ... |
| The HIPC Initiative is a comprehensive approach to debt reduction for heavily indebted poor countries pursuing IMF- and World Bank-supported adjustment and ... |
| www.imf.org |
|
| Special report: debt relief | Special reports | Guardian Unlimited |
| February 6: A year ago the Guardian set out to track the west's promises of action for Africa on aid, trade, health and debt relief. As G8 finance ministers ... |
| www.guardian.co.uk |
|
| Debt Relief Options - Findlaw for the Public - |
| Welcome to Debt Relief Options. This section contains information about the ... To begin, select one of the Debt Relief Options topics from the list below ... |
| bankruptcy.findlaw.com |
|
| William Brewer |
| The Brewer Law Firm. William E. Brewer, Jr., Attorney at Law Board Certified Consumer Bankruptcy Specialist. 619 N. Person Street Raleigh, NC 27604 ... |
| www.debtrelief.com |
|
| Debt Relief - InCharge Debt Solutions |
| There are many ways to get out of debt, for good, and it may be easier than you think. The first step is knowing your options, the second step is taking ... |
| www.incharge.org |
|
| Economic Policy and Debt |
| May 2006, IMF And World Bank Support Cameroon’s Completion Point Under The Enhanced HIPC Initiative And The IMF Immediately Grants 100 Percent Debt Relief ... |
| www.worldbank.org |
|
| Economic Policy and Debt - The Enhanced HIPC Initiative |
| The Initiative’s debt-burden thresholds were adjusted downward, which enabled a broader group of countries to qualify for larger volumes of debt relief. ... |
| www.worldbank.org |
|
| Debt relief - Wikipedia, the free encyclopedia |
| Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. ... |
| en.wikipedia.org |
|
| Debt Analyzer, Debt Reduction Software, Home Page |
| Debt Elimination at its best! Potential savings of hundreds or thousands of dollars! Build debt reduction, timed elimination or consolidation schedules. |
| www.debtanalyzer.com |
|
| Superior Debt Relief |
| We help you get rid of credit card debt much faster than you may believe possible with credit card debt settlement and negotiation tactics, providing debt ... |
| www.superiordebtrelief.com |
|
| Debt Relief - Social and Economic Policy - Global Policy Forum |
| Aid Inflows, Debt Relief Yet to Translate into Reduced Poverty (March 20, 2006) ... Fearing that the IMF could tie debt relief to economic benchmarks, ... |
| www.globalpolicy.org |
|
| Debt Relief - Global Policy Forum - Social and Economic Policy |
| Debt Relief - Global Policy Forum - Social and Economic Policy. The Debt Relief Page Has Been Moved to: ... |
| www.globalpolicy.org |
|
| BBC NEWS | Business | Q&A: African debt relief |
| BBC News looks at the progress of international debt reduction efforts, and the sticking points which continue to hamper the process. |
| news.bbc.co.uk |
|
| Debt Relief Australia - Start Reducing Debt Today! |
| Debt Relief offers Australians in debt assistance with finding the most appropriate debt relief solution. |
| www.debtrelief.com.au |
|
| Debt Consolidation Australia, Debt Relief & Bankruptcy Information |
| Specialising in debt agreements, mortgage refinancing and bankruptcy. Company profile, calculators, solutions, media releases, testimonials and existing ... |
| www.foxsymes.com.au |
|
| Oxfam - Debt and Aid - Debt Relief for Nicaragua: breaking out of ... |
| Oxfam policy paper on relationship between international debt servicing and poverty. Linked to table of contents and also zipped for download. |
| www.oxfam.org.uk |
|
| What debt relief means for Africa | csmonitor.com |
| This weekend's $40 billion debt cancellation deal could spark major improvements in the lives of the world's poorest people. |
| www.csmonitor.com |
|
|