Written by randall on March 16, 2010 – 6:50 pm
We have all seen the commercials, settle your for debt for 50% on the dollar of what you owe. Have you considered hiring a debt settlement company to help you lower your debt? This bad credit counseling because there’s a lot debt settlement companies don’t tell you or you wouldn’t sign up. Hence, bad credit counseling.
It is amazing that all of the Debt settlement companies we now see and hear of, with their 50 years of experience are just now on TV, on the radio and in the phone books, weren’t around until last year. We never heard of them or Debt settlement, with their names designed to comfort us and make us feel that we are able to repay our debt for 50 %. Why? Because of the current economy people are apt to fall prey to these bad credit counseling companies in a quest to repay their obligations. In Debt settlement there is a fee involved that could be as high as 20% of the overall debt. Already sounding like a bad credit counseling strategy. We are trying to get out of debt and we are adding to it. Do the math on $100,000.00 in debt at 50%. Let’s give Debt settlement the benefit of the doubt and say the fee is 15% . We have a total of 1/2 of $100,000.00 is $50,000.00 plus the 15 %, which is $15,000.00. We now have a subtotal of $65,000.00. Most Debt settlement companies promise you a “trust account” of your own. Trust accounts come with management fees. Usually about $40.00 a month. If your program is 36 months or 48 month, add $1,440.00 or $1,920.00 to the total. So now we are fairly close to 70 to 72 cents on the dollar.
In Debt settlement,they don’t tell you that settling your debts is harmful to your credit and if reported to the Credit Bureaus, will make it harder, if not impossible to get a real estate loan in the future. This is certainly bad credit counseling, or lack thereof.
In Debt settlement, they don’t tell you that your monthly payments first are applied to you fees. Typically the first 12 to 15 months go to the “broker” you contacted and the company with the 50 years experience. The broker gets his fee out the first 3 payments you make and the 50 years of experience get theirs from payment 4 through potentially payment 15. And, it goes something like this:
* The broker fee is $8,272.14 paid out over the first 3 months. ($2,416.38 for 3 months)
* The 50 years of experience fee is $7,750.62 paid out over the next 12 months. ($645.89 for 12 months)
* At the end of 15 months you have approximately paid $43,000.00 into your fund. (The fee is $15,000.00 plus $1,500. in banking fees. Your total fees are $15,1500.00, leaving you with $28,000.00 left to settle your accounts in the first 18 months.
In Debt settlement, the hook is…… your monthly payment is lower and you will become debt free should you complete the program. Ask yourself, if this is you, is this bad credit counseling or good credit counseling.
* Programming note: Average and ratio says, in debt settlement you will not make it all the way through and most make it 18 months.
In Debt settlement they don’t tell you the fee breakdown at all. On $100,000.00 of debt at revolving credit terms the payment is around $5,000.00 to $7,500.00 per month.
In Debt settlement they do tell you is that with the 50 years of experience you can become debt free and the payment monthly will be $2,428.96 per month for 48 months.
Debt settlement isn’t always the best option of dealing with debt and it certainly isn’t the only one. There are other ways……..
