Unfortunately, the fact that many Americans desperately need help in settling their debt makes them vulnerable to scam artists. While there are legitimate debt settlement companies out there, it’s vital to know the difference between the ones that offer real help and the ones who are out to take your money. Following are some things to look for when searching for a third party to help negotiate your debt.
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Do it yourself.
Perhaps it sounds overly simple, but the most certain way to avoid scammers is to do the debt negotiation yourself. It may seem intimidating, but if you prepare yourself with information ahead of time and know your legal rights, it is possible to do an effective job settling your own debts with your creditors.
Consolidation and settlement are not the same things.
A debt settlement company works with your creditor to get the amount of debt reduced and the payments and interest rate lowered. Debt settlement can be quite expensive, as you subscribe to the company’s services and pay a monthly fee. Debt consolidation, on the other hand, conglomerates all of your debts into one amount under a new creditor, with one payment and one interest rate.
If it seems too easy, it is.
Some companies claim they will enroll you with no initial fee, and will simply sign you up to pay monthly fees to them. When this happens, you have no signed documents or official agreement between you and the company, and no guarantee that they will do what they said; you only agreed to pay them money. Avoid this scenario – if the company touts “no hassle,” it’s probably a scam.
Do your research.
As you are looking for companies to help you, investigate each one before you agree to work with them, or even before you contact them. Your state Attorney General’s Office and the Federal Trade Commission are good resources, and you can search for company reviews online (for example, type “Company Name reviews” into your web browser). The Better Business Bureau would have records of any complaints made against a company as well.
Avoid giving too much information.
A legitimate debt settlement company will not ask for personal information. They will ask for the name(s) of your creditor(s), the amount owed, and the interest rate. If the company is asking for your social security number or any other personal information, do not give it to them and end the communication.
Look carefully – there may be hidden fees.
Read all the fine print and make sure there are no hidden fees. A debt settlement company may charge you some sort of service fee in the middle of the proceedings after you are signed on with them. Make sure you do not sign any document or agreement until you have looked it over carefully.
Get referrals from trusted individuals or companies.
There’s nothing wrong with asking advice from people who have been there and done that. Your friends, co-workers, family members, etc. may have had a good or bad experience with a debt settlement company. Asking people you trust for advice is not a bad place to start.
If you keep some of these tips in mind, you should be able to avoid scams. One more thing to remember is, to trust your gut. If a company seems fishy or offers promises that seem too good to be true, it’s probably a scam.