PostHeaderIcon why are debt consolidation companies bad?

My GF has a few accounts that have went into collections. Accounts that she had prior to us getting together. We have both fell into a little bit of financial trouble seeing as how our condo (that we are renting) has went into foreclosure right from under our feet. She was told from one of her friends to contact a debt consolidation company and they will help her to take care of the $5k worth of debt that she has that has went to collections. i have found other things online (please see following link)

that advise against such things BUT there is no real reason WHY… we would both like a chance to breathe and would like a 2nd chance to get our credit back into a respectable boundary. I dont care if the consolidation company is going to make money off of us as long as we can start paying down these bills a little at a time and get back on track with the rest of society. Neither of us have and repositions or bankruptcies she just has some credit card issues and a “cosmetic” 😉 medical bill that needs to get paid off…

thanks in advance for any info.

4 Responses to “why are debt consolidation companies bad?”

  • Vadalia says:

    The reason these companies are advised against is because they don’t do anything you can’t do yourselves, and they typically don’t help your credit all that much either. Debt consolidation companies typically make an arraignment with the people you owe debt to pay off less debt than you owe, which doesn’t look good on a credit report. They also charge you a ridiculous amount to do something you can do by yourself. Basically, with debt consolidation, you’re paying to be lazy. Instead, contact the creditors yourselves and make the necessary payment arraignments and use the money the company would have charged you in fees to get rid of your debt faster and actually improve your credit.

  • SlimMick says:

    What you need to know about debt settlement firms:

    Your credit card companies are not going to offer you settlements like 50%, for example, if you are current (not behind) on your payments. If credit card companies offered settlements to people who are current on their payments, then everyone would be calling them up and asking for 50% settlements. Basically, the only way you can get into a position to negotiate settlements is to deliberately let your accounts go into default. This is exactly what debt settlement firms do….They take a monthly amount from you and use that to build a “settlement” account, which will go towards paying the “settlement” at a later date.

    If you are current on your accounts, this process will ruin your credit rating as your accounts will all go into default. Your creditors are under no obligation whatsoever to accept settlements from any debt settlement firm you hire. Their response might be to serve you papers and take you to court.

    Debt settlement “can” be a viable alternative to filing for BK….you just need to be aware that if you currently have good credit…the debt settlement firms will deliberately let all your accounts charge-off/default to put them into a position to negotiate settlements. It can be a stressful and unpredictable process….As your accounts all go into default…you will get increasingly aggressive collection calls from debt collectors. It is “typical” that creditors offer settlements for defaulted credit card debt….They often do this in lieu of loosing everything if you file for BK…..

    HOWEVER, you can never predict how any one creditor will respond to defaulted debt. They might decide to take you to court and get a judgment against you. Debt settlement firms have no power whatsoever to stop creditors from taking this action and they have no power to force creditors to accept settlements.

    ****If you have already defaulted on your cards….make your own settlement offers…you can do this on your own and it puts you in control. If you do…get all settlement terms IN WRITING PRIOR to paying them.

    If you are NOT in default on your credit cards, the debt settlement process will ruin your credit and there’s no guarantee that your creditors will accept settlements. It can be an unpredictable and risky process.

  • armyjoe0820 says:

    Debt consolidation companies are bad in a few different ways

    1. they dont work for free of course so you may save money using them to help lower payment and balances. but you will have to pay them so, does it even itself out.

    2. what ever they do to help you , you can do it yourself with time motivation and dedication. make some call write letters , try to make deals with them to pay a lower amount then what you owe .

    i am not an expert but have been through this before just work hard stay motivated

  • Barbara A says:

    Not all debt consolidation companies are bad. There are many good ones out there. It appears that the link to the website you provided is simply offering an opinion about these companies. As with all opinions, they are just a point of view and not to be taken as indisputable fact. Some people see a glass half full and others may see it half empty. Many people choose to hire a debt consolidation company because they do not have the know-how, time and energy to achieve the debt relief they desire. Debt help companies deal with creditors and debt collectors on a daily basis – you would think they know what they are doing. Just make sure you do your due diligence on a company you’re looking into, and make sure you get all your questions answered to your satisfaction. Good luck!

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