Debt Settlement Companies-proceed With Caution

Not a day goes by that I don't hear an advertisement on the radio for one of these companies advertising their services

. They make what they have to offer sound so appealing. All you have to do is call them and your debt will magically go away. But it is the things they are not saying that you need to be concerned about.

First of all, it is not debt settlement itself that I am against. There is a time and place for this type of debt relief. However, a settlement on your debt is something that you can negotiate on your own without the help of a service. Most of these companies have fees that can be quite costly and then there is what they actually charge for the service. That is usually based on the amount of money that they save you. This can range from 15%-25%. This money is better used paying off your debts than paying for a service that you can do for yourself.

The one thing that I find very irritating about these companies is that they never seem to mention any of the negative aspects of settling your debts and some of them are severe. Depending on your situation, debt negotiation may still be your best option. But for some, it may be a deal breaker.

It is true that many lenders will settle the debt for 30 to 70 cents on the dollar, but this will not normally happen until the lender has not received a payment for 6 months. You must understand that you will be taxed on the amount of the debt that is forgiven. So, if the lender is reducing your debt by $5,000, you will get a 1099 from the government for taxes on that amount. Also, this debt relief option will ruin your credit, but if you have not made a payment in 6 months your credit is already negatively affected.

I have seen and heard a lot of advertisements for debt settlement companies, but I have never heard one mention any of the negative aspects of settling your debts. If you are person looking for debt help, but you are current on your payments, I would recommend credit counseling first. Their options are credit friendly and are more accepted by lenders. Debt counseling is a form of debt consolidation that will allow you to pay all of your consumer debt with only one payment and there is no loan required. This should be your first stop for debt and if they cannot help you, they will advise you as to what your debt relief alternatives are.

by: Marjorie Salada

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