Debt settlement companies can be a dangerous option for people struggling with debt. They promise to negotiate with your creditors to reduce your debt, but they often charge high fees and don’t always deliver on their promises.
Here are some of the dangers of using a debt settlement company:
- High fees. Debt settlement companies typically charge a fee of 15% to 25% of the amount of debt that they settle. This can be a significant fee, especially if you have a lot of debt.
- Damage to your credit score. When you stop making payments on your debts, your creditors will report this to the credit bureaus. This can damage your credit score and make it more difficult to qualify for loans and credit cards in the future.
- Risk of being sued. If you stop making payments on your debts, your creditors may sue you. This could lead to a wage garnishment or even bankruptcy.
- Potential for scams. There are many scams in the debt settlement industry. Some companies may take your money and then disappear, or they may charge you exorbitant fees.
If you are considering using a debt settlement company, it is important to do your research and choose a reputable company. You should also be aware of the risks involved and understand that debt settlement is not a guaranteed solution.
Here are some tips for avoiding debt settlement scams:
- Beware of companies that charge upfront fees. Legitimate debt settlement companies typically don’t charge any fees until they have successfully settled some of your debt.
- Don’t stop making payments on your debts until you have a signed agreement with a debt settlement company. If you stop making payments before you have a signed agreement, you could damage your credit score and risk being sued by your creditors.
- Get everything in writing. Before you sign any agreement with a debt settlement company, be sure to get everything in writing, including the fees they will charge and the services they will provide.
If you are struggling with debt, there are other options available to you, such as credit counseling and debt consolidation. You should talk to a financial advisor to discuss your options and choose the best solution for your situation.
DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt. Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email contact@dmcconline.org.DMCC is located at 1330 SE 4th Ave, Suite F, Fort Lauderdale, FL 33316.