There is one industry thriving in hard economic times and that is the debt settlement companies. You see the ads everywhere:
Reduce your credit card bills 50%! Avoid bankruptcy! The relief is real!
As a consumer in debt it is hard to ignore them. These advertising debt-settlement companies claim they can significantly reduce your debts by negotiating directly with creditors. But not everyone is convinced.
Even the FTC has taken action against steps to make sure consumers are better informed.
“With this rule we’ll be taking a major step towards cleaning up the Wild West of debt settlement,” FTC Chairman Jon Leibowitz says.
It is a growing industry and with so many people drowning in debt the demand for their services is growing.
Are they really a helpful intermediary between borrowers and lenders? Or are you better off without them?
Since they charge a fee upfront you have less money left to pay off your loans. And success is not guaranteed while negotiations can take a long time. Negotiating a debt settlement is something you can do on your own too.
Be careful when they tell you to stop paying your bills. This will lead to late fees, higher interest rates and probably lawsuits!
You are better off asking the help of a credit counselor. There are non-profit credit-counseling agencies that will really help you set up a debt management plan.
They are no magic pill though. They are often funded by banks and their main goal is to make you stick to a payment plan. Success is not guaranteed but their advice can be helpful if you care to listen and make changes in your spending habits as well.