Debt Settlement Companies
Debt settlement companies have an in-depth understanding of how credit scores are calculated and can help you pinpoint ways to improve your credit score and organize your payments in the most effective manner. Their primary strategy involves focusing on each loan individually. Instead of making small payments to each debt collector, they assist you in saving enough money to pay off the entire loan with a single lender. This is due to the fact that when debt collectors see larger amounts of cash, they can accept drastic settlements that save a great deal of cash. On the other hand, if small payments are made on each loan, interest and fees accumulate and payments become negligible. There is also the risk of reviving the statute of limitations or extending the date of last activity on the loans, causing the loans to remain on credit reports for an additional seven years. Therefore, settling each loan in full, one at a time, is the best way to quickly clean up your credit report and increase your credit scores.
Nevertheless, these debt settlement firms are expensive and add to the debt burdens. Typically, they charge up to 20% of the loan amount to be worked on or up to 25% of the savings that the companies were able to generate by paying off the loans. Therefore, if a customer owes a total of $50,000 in loans, they can eventually pay up to $10,000. However, if the loans were reduced to $30,000, the savings would be $20,000, and 25% of that is $5,000. These are enormous numbers, and many customers agree to this torture in order to dramatically improve their credit scores and save money on future loans that are only available to those with good credit.
In addition to the expense, many debt collectors increase their efforts to collect their loans when they discover that customers are utilizing debt settlement companies. In exchange, debt settlement companies may recommend that you stop making payments, causing your accounts to accrue additional fees and interest charges in order to convince your creditors to accept the lowest possible settlement amounts. This frequently succeeds, but it's risky.
Alternatives
Using an attorney to file for bankruptcy is an alternative option. Keep in mind that debt settlement companies would not recommend bankruptcy if it meant that you would not use their services, even if bankruptcy is preferable.
Additionally, credit counseling programs can be beneficial. The majority of these organizations are non-profit and educate borrowers on loan repayment while assisting them in the process. While customers are enrolled in such programs, many creditors will not pursue collection efforts and will not charge late fees or additional interest costs.
But if you want to save the most money, you should educate yourself on what settlement companies do and do it yourself. You would need to save money, negotiate with debt collectors, and settle your loans individually."""
