Everyone enjoys getting out and spending a buck or two. Some of us spend responsibly and others spend their money as if it grows on trees. Money actually does grow on trees for some, others imagine that it does and for some, like my self, I know my money does not grow on trees. I don’t even own a money tree. Truly I didn’t even know they existed, sometimes I wish that I had a money tree, but that’s a story for another time.
Since a very small percentage of consumers spend their money wisely. The majority of the spenders, throw their hard earned money around without much thought for the future. There are new deals everyday of the year. Everywhere businesses are competing for the money in our wallets. And by now we’re used to it. Sale after sale on everything.
Everyone is doing their part to help us part with our money – businesses, online tools, personal shoppers, stylists and everyone in between. So, what happens when shit hits the fan and you get into debt? You’re on your own for the most part to find your way out of debt. Don’t loose sleep though, after all you’re not on your own.
There are new players on the scene. We have all the businesses competing for your money. And now we also have businesses competing for your debt as well – Debt Settlement Agencies.
The ads are pretty good and it’s hard to look away, because the advertising is directly targeted at those who are in debt. The ads are fairly aggressive and to the point. These ads promise to help you get out of debt in 36 months, all the phone calls from the creditors will stop, you don’t need to file for bankruptcy and you can even wipe some of your debt away without ever having to pay it back. These ads are quite inviting and sound too good to be true.
Every morning on my drive into work, as I flip back and forth on the radio, I hear the same commercial at least five times in a span of half hour. Same message is repeated over and over, “there is a new government program to help Canadians get out of debt!” A phone number is repeated over and over and it asks for those who are in debt to call in and see if they qualify.
So, just who are these new businesses willing to work on your behalf to reduce the amount you owe? They are offering a service. Debt is such emotionally charged topic though, that a lot of people don’t stop to really analyze what is being offered. Instead, most only see the promise, sometimes a very empty promise, of a solution to their financial woes.
I am not here to judge and I firmly believe that there is something good in everything.
Not all of these debt settlement companies are out to get us. It is up to the individual to do their homework and find a debt settlement company that has their best interest at hand. Like in any other industry, not all businesses are reputable. There are a lot of honest businesses and there are equally as many businesses who carry on doing shady business.
Trying to break it all down, it seems to come to this: If you simply want to make your debt go away and you’re willing to entertain some (maybe you will never get any) phone calls from your creditors to get there, debt settlement might be the way to go.
So, what exactly is debt settlement?
Debt settlement is having a company work to discharge your debts over a shorter period of time (three years or short as 90 days if you have a lump sum). Typically it is unprofitable for these companies to keep clients longer than three years.
Furthermore, they will help clients create a budget and some (the good ones) will coach their clients about how to respond calls from the creditors and staying within their budget. However, the majority of their time is not spent on the immediate task at hand – eliminating debt.
Each debt settlement company works differently, yet their overall goal is the same. Generally they will set up a payment schedule for clients who enroll. Every client sets up a monthly payment and every monthly payment is added into a trust account. Once there is enough accumulated in the trust account, the company will negotiate with creditors, in the hopes they can arrange a lump-sum payoff for less than the amount owed. In some cases the client stops making payments to their creditors altogether.
How do the debt settlement companies get paid?
The fees are earmarked and taken from the amount accumulated in trust. Other times clients need to pay the debt settlement company fees up front before this service is rendered.
In most cases though, some fee needs to be paid upfront to the debt settlement company, before any service is performed.
So, if you’re thinking about using a debt settlement company, here are a few tips to keep in mind when doing your research for a reputable company:
- There is a difference between debt settlement companies and non-profit credit counseling agencies.
- Check with your local better business bureau (BBB) to gain some history on the potential debt settlement company.
- Prepare a list of potential questions to ask and never be afraid to ask something if you’re unsure. Keep in mind, they need your business, just as much as you need their services.
- There’s no debt relief program that’s beneficial to the clients credit score rating. This includes debt settlement companies and non-profit credit counseling agencies.
- There may be upfront fees associated with the services, many times with no guaranteed return.
- Remember: As a consumer, you can take the same steps a credit counseling service will.
- If you are told to stop paying your creditors, do some hard thinking before you do so.
Take your time and do your research right. I am by no means bashing debt settlement services. These services are right for some people and not for others. Find out what’s right for you. And for Pete’s sake, please don’t sign anything right away. Sleep on it. Read any contracts you are given carefully.
Education is everything and understanding what you are getting in exchange for the fees being charged is a must, and understand that there are always alternatives to consider as well. Credit counseling and bankruptcy trustees are just two alternate sources.
In the end, I guess you can say I’m not surprised with all the debt settlement ads everywhere. On the radio, TV, newspaper, Facebook and even in the mail. It’s January after all, the month after the holidays, and the month of truth as I call it. January is the month that a lot of people discover how much and how deep in debt they truly are.