|Enter your total debt in US dollars|
|Type a monthly payment you can afford to become debt free|
Note*: Put the average interest rate that you are paying or that you were paying on your accounts. This will be used to calculate how much you would end up paying when staying current on your accounts. The interest rate that you put in here, will not effect the figures that are calculated for the consumer credit counseling and debt settlement programs.
There’s a big difference between debt settlement and debt consolidation (via consumer credit counseling). You need to be intimately aware of both options before deciding to take the plunge. To start with, people who have more than $50,000 in debt typically opt for debt settlement. Choosing otherwise could still put them in a situation where it’s impossible to make minimum payments. But my personal feeling is that debt consolidation is the way to go because in the end, you’ll be able to feel good about paying back the total balance you owe. To help you in your decision, you can use the debt calculator above which will give you a clear and personalized picture of either scenario.
At any rate, let’s first look at debt settlement in detail as we examine both options. It should interesting for you to know that I, myself was a debt settlement officer so I can give you the real lowdown on this. Believe me when I tell you, debt settlement is a dirty industry, which is why I quit after 3 days. In the example spiels that each officer would learn, there were exaggerations that I couldn’t live with so I refused stay. That decision helped me wind up homeless for a while, with nothing but me, my car and my integrity. It was miserable but I would do it again if I were put in the same situation.
So now let’s talk about what happens behind the scenes of a typical debt settlement company. Inside there is a large room filled with people that are as exuberant to take care of your debt as your are to get rid of it. That’s because each new account translates into big money for them. Each settlement officer is constantly polishing his shtick as he follows up on leads and fields calls. If you deal with one, you should know that he really doesn’t have to be truthful, just convincing. But you can keep him accountable by testing out his figures with an amortization calculator as he speaks. Don’t be afraid to interrupt him as you do your calculations.
A debt settlement trick to watch out for:
They will say that you can get a rate “as low as” whatever whatever per month. But they don’t tell you that the lowest tier rate is contingent on you paying your entire balance in one payment!
If you agree to the terms of your debt settlement package, your call will be transferred over to the closer who will read the terms to you as it is recorded. When you verbally agree to the terms the deal is finalized. During this phase, be sure to listen closely. Don’t let the deal closer put you to sleep with her refined and long winded spiel. Work out numbers with your calculator if you have to. Management at these firms are very intent on training these closers carefully because loosing fish at this stage can be a problem.
When the recording is finished, your account is transferred to a law firm that specializes in debt settlements. They work directly with your credit card companies to negotiate the payout terms. After agreeing to the debt settlement package, you will be instructed to make no more payments and after six months the lawyers will negotiate on your behalf. However, until that time you will be making regular payments to the debt settlement company. Your first payment goes to the debt settlement officer who enlisted you and your subsequent payments are split between the debt settlement company, the law firm and lastly, your credit card companies.
Keep in mind that although there are a lot of dirty players in the debt settlement industry, working with one can actually be beneficial for you. No matter how morally corrupt they are, your payment plan of $200/month for 2 years sure beats a payment plan of $800/month for 3 years. And you would be surprised to know that your credit card company could actually come out even. After years of collecting interest plus your principle, they might even be making a profit with your debt settlement deal.
It’s important to know that going the route of debt settlement does not always ensure success. In fact, when your settlement lawyer starts negotiating with your credit card companies, one or more may reject the settlement deal and decide to sue you. But rest assured that this happens only about 3% of the time. The worst thing you can do is ignore your debt and do nothing because in that case, you can expect a lawsuit 100% of the time.
Like I said before in the introduction, between the two options in this post I like debt consolidation. Not only does it help you with the integrity issue, it’s not an unforgivable black spot on your credit report. Banks don’t want to admit this, but years ago the big ones set up different consumer credit counseling organizations to shepard people into this option. The banks have secret agreements with these crony organizations to automatically accept drastically reduced rates. Without this option, more people would be headed for debt settlement or even worse, bankruptcy.
So in a nutshell, debt consolidation involves lumping all or some of a person’s debt into one loan with a lot lower interest rate. The credit cards are paid off and cut up which makes it impossible to return to them. What’s more, you receive counseling to break the habits that got you into deep debt in the first place. Anyway, by using the debt calculator in the beginning of this post, you will soon be at a better vantage point as to which option you should choose.