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Thread: What exactly do debt settlement companies do for you?

  1. #11
    Platinum Member Rose Mosse's Avatar
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    If your situation is dire and your credit is already severely damaged and you're unable to pay your creditors, speak to an insolvency/bankruptcy trustee to look into your options. They will be able to file on your behalf (consumer proposals or bankruptcy).

    Since you already have an appointment booked and I'm assuming it's a free consultation of sorts, go for the consultation and ask as many questions as you need to ask. You might be most interested in interest rates and what they're actually collecting from you for their services and what those services are.

  2. #12
    Platinum Member Wiseman2's Avatar
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    You could try negotiating with each individual card company to see if they can lower your interest. That's all these people do. The interest is what's killing most people more than the principle.

    Also go to your bank in person to talk to someone. Keep in mind filing bankruptcy is something creditors don't want you to do because then they get nothing (and sucks much worse for you).
    Originally Posted by honeybun35
    They say they're rip offs and they don't pay your debts they make you save your own money.

  3. #13
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    Originally Posted by abitbroken
    but the best way seems to be the Dave Ramsey method - pay everything on time and take your smallest debt and pay a bunch extra on it each month until its gone, then target the next debt.
    That is Snowballing.

    You have to figure out what is better: paying smallest debt 1st vs. highest interest 1st.

    The idea is if you have a bunch of bills:

    CC 1 owe $1,000 monthly $40
    CC 2 owe $1,500 monthly $50
    med bills owe $5,000 monthly $100
    car loan owe $10,000 monthly $200
    student loan owe $50,000 monthly $400
    mortgage owe $100,000 monthly $1,000

    Your monthly nut is already $1790 so you pay the minimums on everything, upping the smallest as much as you can. Let's say you even just go to $1800 per month. It will take you about 2 years to pay off the 1st card. But then instead of pocketing that extra $40 per month you are not paying because you paid off the 1st CC, you add that $40 to the payment of the 2nd CC. So now you will pay that card $90 per month until it's paid off. Then you add that $90 to $100 you were paying toward the medical bills. Remember you are already used to having to pay $1800 so you just continue doing that. In theory you get it down to paying $1800 per month instead of $1000 to your mortgage to get that paid off sooner too.

    All of this is dependent on not racking up new debt. Once you pay everything off, the $1800 in debt service you were paying gets paid to you as your monthly savings. Wouldn't it be nice to know you are putting $20k in the bank every year?

    If you want to pay everybody off you would need larger chunks of money to get debtors to compromise. They won't reduce the balance & let you pay over time but they might take 2/3 of the debt in a lump sum.

    You cannot filed for bankruptcy until you go through some type of credit counselor / debt consolidator but get a recommendation from the bankruptcy lawyer to steer away from the crooked ones.

  4. #14
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    Originally Posted by abitbroken
    I disagree with freezing the credit card. I would keep one and only use it in true emergencies while an emergency fund is built.
    Most people don't have self control. Hence the need to make the card inaccessible.

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    I never do it I changed my mind

  7. #16
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    Debt management programs are different than debt settlement programs. I used a debt management program to pay off my debts. Debt settlement companies wanted to charge me a lot.

  8. #17
    Platinum Member j.man's Avatar
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    Originally Posted by boltnrun
    Debt management programs are different than debt settlement programs. I used a debt management program to pay off my debts. Debt settlement companies wanted to charge me a lot.
    Very much correct. "Settlement companies" involve actual settlements, as in paying some amount less than the total balance owed. Debt management programs generally work as a more specialized personal loan to consolidate your debt without the >20% APR. That on its own doesn't impact your credit beyond adding a new installment account. Unfortunately, people who need a debt management program tend to delay to the point their credit gets too shot for one. It's why often, even when it's given with the best of intentions, "just spend less and stick it out" is some of the most destructive advice you can give.

    Obviously Step 1 is to never get into crippling debt to begin with if you can avoid it. But beyond that, it's very important to do a no-BS assessment on how long you can sustain your life and your debt. If it is a matter of eating out less, cutting back on booze, and putting more down on the principal, then by all means. If you know you're stuck in a hole with only one way to dig, then you need to be exploring your options to consolidate your debt sooner than later. Your debt is your responsibility, but there's no reason on Earth any commercial creditor should command your loyalty. Get a better deal ASAP.

    Most credit card companies won't even entertain freezing your interest until your account has tanked into the bottom bucket. Generally, that's 6+ months delinquent, meaning your credit's toast no matter what you do. If you've been a loyal and on-time customer for several years you might be lucky if they revert your interest to a non-penalty though non-promotional rate before it comes to that. But 15% - 24% is still pretty egregious. There's a lot from my time collecting on delinquent accounts I'm not proud of. Bottom line is to take it seriously and sit down with professionals the moment you feel like your nose is or even might start sinking beneath the water.

  9. #18
    Platinum Member Wiseman2's Avatar
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    Developing self control is the key and should be implemented not avoided. Call the card companies, try to negotiate for lower interest. Stop using some cards. Never make minimum payments. That is calculated to ensure maximum interest. Card companies are in the business of making money. Once you dig out, use your cards and mentally know you will pay the balance off in full each month. If you can't, don't buy it.
    Originally Posted by TeeDee
    Most people don't have self control.

  10. #19
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    Originally Posted by Wiseman2
    Never make minimum payments.
    See my above post about snowballing / the Dave Ramsey method. You do make minimum payments with that one. Making the minimums is still better then not making any payments.

  11. #20
    Platinum Member Wiseman2's Avatar
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    Not getting into debt and paying in full prevents high and compounding interest. Paying the minimum is precisely calculated to maximize profits. It is what buries people in debt. The only one benefiting from that advice is this internet guru.🤑
    Originally Posted by TeeDee
    See my above post about snowballing / the Dave Ramsey method.

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