If you find yourself with an outstanding number of debts, there are some debt settlement companies that promise to reduce, or even eliminate your debts. Sounds like a good option, right? It may appear like a great deal, but debt settlement can be a tricky process. Without adequate knowledge and support from a trusted system, utilizing a debt settlement company can quickly turn into a disaster-in-disguise. Here are some of the biggest myths surrounding settlement programs:
- All Companies Are Created Equal
When we think about debt settlement, it is important to remember that not all companies are equal. Not every company is the same. Some groups will try to scam consumers by paying them outrageous amounts. A company should never encourage you to take out a loan. The key is to find the right people to help you clear your debts, and only a legitimate financial adviser will be able to save you time, money, and stress.
- All is forgiven
Payment of only a portion of your total debt will directly affect your credit report, although if it is a method agreed by your lender, all outstanding debts that have been resolved can live on your report up to 7 years. Although settlement programs seem to reduce your overall debt, they can still negatively impact your finances.
- Consolidating loans are the best option
Consolidation loans are a good option, and some companies are promoting them so that you can pay off existing debts. What they don’t tell you is that the interest rates on these new loans will be higher, which will lengthen the time it takes you to pay off your total debt. Simply put, using loans as a form of repayment is a quick fix that can cause big problems later on. Additionally, when you take out a loan to pay off your credit cards, you run the risk of filling them up again. Then your debt load has doubled!
- Skipping payments is a good idea.
Many settlement methods encourage you to skip paying your creditors to get them to accept smaller payment, rather than nothing at all. It can lead to lenders stepping up their collection efforts and allowing them to file a case to receive what they’re rightfully owed. After a while, interest, late fees, and penalties will continue to be charged to your account and you will owe them more than the initial amount.
- I’ll never get out of debt if I don’t go through a debt settlement program
As tempting as debt settlement sounds, they are not always the best option for your debt repayment efforts. There are several ways to resolve your debt without going through the settlement process. If you have difficulty meeting the minimum monthly payments on any account, seek advice from CreditGUARD of America. Certified credit counselors will encourage you to manage your finances and help you plan your future spending without risking any negative impact on your credit rating.
- I can settle my debt on my own
Paying off your debt with collection agencies can be stressful. Many creditors will make negotiations more difficult, so our financial counselors do not recommend this as a good option. Having the right adviser on your side can give you the best results by guiding you on how to stay debt-free. After all, that’s what they do best.
- Once my debt is settled, I don’t have to worry about it anymore
If the company agrees to settle your debt and the amount exceeds $600, the amount will be taxable. This means that you will end up paying the full amount one way or the other after the taxes add up. Once you settle, your credit rating will take a negative impact because you settled.
Remember that there are many dangers involved in debt settlement. Try to gather as much information as possible to find the best way to get rid of your debts. Even then, you should explore your options and find a good company that can represent your needs.
Visit our CreditGUARD of America’s Debt Management page at https://creditguard.org/ to learn more about our services and see what your next steps should be to attain debt-freedom. Schedule an appointment today via phone at 800-282-8497.