Negotiate a Debt Settlement
Please send me your thoughts on going into a credit negotiation program.?
What about those over exposed credit companies that promise you to eliminate your credit card debt by entering thier credit negotiation program? Seems to me that you put your life and credit history in their hands with no garantee. Anyone has participated? I have "mid sized"credit card debt BUT no bad credit. Pay ontime. Only Problem: monthly payments are killing me. What is the truth on dealing directly with credit card companies?? Please, can anybody share ideas and experience? Tks
Public Comments
- All these credit negotiation companies do is negotiate with the credit card companies on a final balance to pay off. For example, if you owe 10k in credit card debt, these companies will call up the credit card company for you and try to negotiate a lower debt, let's say 9k if they pay it off right now. Usually, they are successful and they pay off your debt for you. Then they become the new creditors in your life. There they manage your remaining debt and thats who you pay, but they charge their new interest on your balance and a fee for the service. Thats who they make their money. Plain and simple. You can do the same thing on your own by calling up the credit card companies and explaining your problem and negotiating your own debt for FREE. It's more advantageous to do it yourself and you dont risk missing payments or paying more interest, which credit negoitators usually force you to do, so they can claim your balance. Basically a no no. Don't do it.
- The IRS recently took a giant crap on most of these companies. They are required to be not-for-profit companies, and the IRS found that almost all the ones they reviewed were not behaving like a non-profit should be. Keep in mind, these guys are typically going to get paid a monthly fee by you, and also get a cut or fee from the credit card companies. So, they have pressure from the wrong side. I'd call a local credit union and see if they'll give you an installment loan that you can use to pay them off instead. Problem is, if the monthly payments are already killing you, you're in trouble, since those monthly payments on cards are often just 1-3% of your balance, and barely even pay anything down on the debt. If you actually want to pay off the debt, you have to pay more. The negotiating companies can sometimes get your interest rates lowered or even frozen in extreme cases. And while they will tell you that lenders love seeing people take steps to get back on track, the only lenders that will love you are the ones you currently owe. In the mortgage world, going into a credit counseling program is seen as identical to a Chapter 13 bankruptcy. Both are similar, in that a 3-5 year plan is made to repay your debts, some debts and interest could be forgiven, and you pay someone else who then divvies out your payments. Only difference is you didn't get a lawyer or go to court. Be cautious with any of these companies. Some are legit, but most aren't very good. PS, I have seen many cases where people's credit reports end up getting trashed, because some banks won't be getting their minimum payments, and their systems will start flagging you as late, even though you are paying them as agreed. Ouch.
- I have participated in one of these and while it worked at eliminating the debt eventually, I was being harassed on a daily basis from my credit cards!! I also remember it showing up on my credit report as a negative in one way or the other. I would definitely be skeptical, and we were in a similar situation. Payments were being made on time, moderate debt load, etc. Looking back, I would just get a low-interest loan from a local credit union or your bank and just pay it off through them. Good Luck!!
