Dealing with Debt Settlement Companies: Some Useful Guidelines

2007-03-08 10:33:40

( Financial )



There is so much bad press about debt settlement companies that it certainly is wise to keep away from them. But if you have a lot of debts and are just one meager thread away from bankruptcy, you may have no choice but to do business with them. In such a case, you just have to put your reservations aside and do the plunge. However, you do not have to jump in blind. You certainly have options, and with the right information, you can do successful and maybe even favorable business with them.

First of all, you have to keep an eye out for the different companies that provide debt consolidation and settlement opportunities. These may be credit card companies, banks, and independent loan companies.

Then think about the benefits. If you have a variety of car loans, mortgages, student loans, and credit card debts, you should consider getting debt help from professional service providers. This is because the trouble of keeping up with all these debts usually leads to numerous late fees and skyrocketing interest rates. There are debt settlement companies around that will offer you debt settlement packages you can use.

Debt consolidation means you can combine all your different obligations into one account. Thus, it would be easier to keep track of your due date, and you will not get confused about the interest rate terms.

You can then start rebuilding your credit by keeping up with your monthly dues in a timely fashion. After all, you will only be taking care of one account.

But beware of the drawbacks. The fact that you need debt consolidation usually means you owe a lot of money to various institutions. And, this also means that your credit rating is not attractive enough for lending institutions.

Thus, if debt management companies offer to consolidate your debts, they are doing it to gain a wider client base and, of course, to profit from your distress. With this, you should read the fine lines. Better yet, read between the lines.

Realistically speaking, because of your low credit rating, you may have to settle for variable rates instead of fixed interest rates. You may also get high late fees. Thus, you have to look around for the institution that will give you the lowest among these variable interest rates, and the most flexible payment terms.

You will also have to consider the fact that due to your less than pristine credit score, you may find it hard to find one package that offers you a high enough credit limit to cover all your debts. Thus, after rooting out the better debt settlement companies, do not be hasty in finding out how much limit they can actually give you.

Finally, weigh all the factors like introductory rates, actual interest rates, type of interest rates, fines, payment terms, credit limit, the reputation, and the business practices of the debt company. Then, choose the debt company that offers you the combination of features you know you can live with. The bottomline is to find yourself a debt settlement company that will not sink you deeper in debt.


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