When your debts keep piling up and you see no way out, you may turn to any source that promises to relieve you of this burdening situation. Advertisements from debt relief companies may become more enticing, as they guarantee you an easy escape through consolidation or settlement for a nominal fee.
Can you trust these companies, or are they too good to be true? More often than not, you should avoid them for these three reasons.
1. Most are scams
Unfortunately, most debt-relief services are scams, particularly when it comes to settlement. These companies seek out people desperate enough to fall for their unrealistic promises. In the end, they will not deliver what they said they would, and you will likely find yourself in even more debt than before. Signs to watch out for include charging upfront fees (which is illegal), encouraging you to stop paying bills and guaranteeing complete debt elimination.
2. Promises are inaccurate
Even if the company is legitimate, its promises are still likely to be empty or come with hidden fees and conditions. Lower interest rates for debt consolidation tend to only last for an introductory period before going up significantly. Debt will likely take longer to pay off, as well, not saving you as much money as you hoped despite lower monthly payments due to interest. Creditors may choose not to work with a settlement company either.
3. You do not obtain financial counseling
Debt relief plans may take care of your debt for now, but what about in the long run? If your financial management does not change, then your debt problems will only return. The bankruptcy process, on the other hand, includes mandatory credit counseling to help you learn how to better manage money. Of course, not all causes of debt are your fault, such as medical emergencies, but the advice is still helpful in managing finances until the debt is gone.