Question: Should I consider using debt relief companies to start paying off my debt or is there a better way?
Answer: Most have seen countless advertisements, both online and offline, from companies claiming they can reduce or eliminate your debt.
These super-hyped ads are quite convincing and they make it seem like they have the solution you are looking for to address your debt problem. However, more often than not, the consumer pays the price for these quick-fix programs.
"Try not to become a man of success
but rather to become a man of value.”
- Albert Einstein |
The explosion in the number of debt relief companies open for business is certainly a sign of the times. As consumers began to borrow more in order to finance their “gotta have it now” lifestyles, many have created a financial mess for themselves.
Can I say without a doubt that 100% of these debt programs are scams? No. But I’m fairly certain that most, if not all, do not do anything for the consumer that the consumer can’t do for himself.
These companies always claim they can reduce your debt or completely eliminate it. All you have to do is pay them upfront (Funny how they don’t offer pay-for-performance programs, isn’t it?), follow their program and in a given period of time your debt will either be greatly reduced or eliminate altogether.
Hogwash! Don’t fall for it.
Folks, these claims simply aren’t true. No creditor is willing to entirely forgive your existing debt because an outside company has requested that they do so.
When people agree to take a loan or obtain a credit card, they are under an obligation to repay any money they have borrowed. The lender will not simply allow you to walk away without repaying the borrowed money. If this were so, they would all be out of business.
Now, they might be willing to reduce the amount owed if you agree to pay the entire balance now. In other words, they will give you a discount in exchange for full payment. This is the best case scenario… and it’s something you can negotiate with the creditor yourself.
If I were you, I wouldn’t any of those debt relief companies to negotiate for me… and in my opinion, neither should you.
What about reducing interest rates, or negotiating a different payment on an existing debt? Same thing, just pick up the phone and ask the creditor what options are available. Be completely upfront and transparent about your current financial situation.
Now, if you are currently making all your payments on time the creditor might not be so willing to change the terms. After all, they have every right to expect you to stick to the agreed upon payment plan.
However, if you are struggling and already having difficulty making payments, a creditor may decide to work with you rather than run the risk of you defaulting altogether.
The bottom line is that one way or the other your credit rating is probably going to take a major hit. So don’t go down this path unless you are sure it’s what you need to do in order to survive the financial mess.
It’s true, anyone can attempt to do what these debt relief companies claim they can do. But in the end it comes down to what your creditor is willing to do and what you are willing to do. It really is between you and the lender and you are better off keeping that way if possible.
Re-organizing debt can feel like an overwhelming task, so take it one step at a time. First, get it all down on paper. Knowing the concrete numbers instead of simply repeating a generic mantra of “I owe money” in your head will empower you to make more informed decisions.
Don’t let your debt control you and don’t be fooled by these so called debt relief companies. Instead, educate yourself. Take personal ownership over your financial situation. You can get through it
"Debt is like any other trap, easy enough to get into,
but hard enough to get out of."
- Henry Wheeler Shaw |
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Debt is NOT your friend. It's not a wonderful "tool" for building wealth. That's a myth.
