Not being able to keep up with your bills can prove overwhelming, and especially if things have gotten to the point where you fear you are going to lose your car or your home. Many Americans are currently struggling in the face of mounting debt, but unfortunately, some for-profit companies prey on their fears and pressure them into debt settlement arrangements that often do more harm than good.
When you enter into an arrangement with a debt settlement company, you typically must transfer that company an agreed-upon amount of money on a monthly basis. In turn, that company is supposed to negotiate with your creditors and work out an arrangement that allows you to pay back only a portion of your debts. While this may sound good on the surface, there is considerable risk involved when working with a debt settlement agency, and here is why.
It is not a sure thing
While a debt settlement company may tell you they can knock off a certain percentage of what you owe to your creditors, your creditors do not necessarily have to comply. In other words, if your credit card company does not want to agree to the terms proposed by the debt settlement agency, it does not have to do so.
Your credit can take a hit
Typically, when you agree to work with a debt settlement agency, the agency will instruct you to stop sending payments to your creditors. This can lower your credit score, however, and it can also lead to additional late fees and associated penalties, potentially digging you even deeper into debt.
Scams abound
Again, some companies regrettably take advantage of those facing financial hardship. Some debt settlement companies operate under unethical means, and they will encourage you to sign up by making false promises and failing to deliver on them or fully explain the risks involved.
If you are considering utilizing the services of a debt settlement program, do your research first. You may have better, safer options available to you.
