The Drawbacks Of Debt Relief Companies

There are many debt relief companies and debt solutions companies that have materialized onto the market in the last couple of decades. They portray themselves as these philanthropic agencies, that will fly in like superman and save you from your terrible creditors. When you do some research on these companies however, you will soon find out that they aren’t any different than other companies: They want to make some money. The reason these kinds of businesses have exploded onto the market scene is that ‘helping’ people with their debt has proven very lucrative.

Debt consolidation companies will lend you all the money you need to pay off all those expensive credit card debts of yours. When you take out their loan you will only need to pay a fraction of your current monthly payments each month. That will save you a lot of money every month to live the luxurious lifestyle that you’re accustomed to. They’ll even provide you with a diminished rate of interest.

There are two problems with this action. The first is that your lifestyle is what got you into debt in the first place. People feel they’ve gotten out easily, and will keep living the way they’re used to. 3 out of 4 people who consolidate their debt, will get into debt again.

The other problem is that by making these smaller payments, their debt stays in existence longer. The longer a debt exists, the more money you pay. Even with the diminished rate of interest, the debt will grow larger than it would have with the previous creditors. Even though you’re spending less money on your debt each month, you may spend thousands of dollars more over the years.

Debt settlement companies will try to make a bargain with your creditors. They act as your personal debt negotiators have certain negotiating tactics that will make your creditors agree to settle your credit card debt. They keep your money from your creditors for half a year, and then they will start negotiating. Your creditors by that time will think you’re going to file for bankruptcy, so they’re more willing to accept a smaller payment if the alternative means they won’t get a dime. Again, there are two problems.

The first problem is that settling credit card debt is something you can do very well on your own. You don’t need to hire outside help to do this. In fact, it may hurt you if your creditors find out you have hired a debt settlement company. They are annoyed by this, because they will feel cheated. They will know you haven’t had the intention to pay back any money you spent using their credit cards. But besides that, why would you pay someone a hefty sum for something that can be done by yourself?
When you have settled your debt, your credit score will have suffered a significant drop. This will make it much harder to get a loan of any sort without huge interest rates or to even get approved. People don’t like lending money to people who won’t pay back what they owe, you see?

Fortunately can find some companies  that do have a genuine interest in helping you out with debt. Such a company is Freedom Debt Management. This non-profit organization will not try to take your money, but will instead give you valuable advice on how to get out of debt without cheating your way out. The best part is that they give you all of this debt management advice for free!

Thank god for companies such as Freedom Debt Management that stand apart from companies that pry on people that have already been weakened financially by actually helping people.