Question Regarding Debt Relief Programs?
How does a debt relief program work and what are the benefits. How does one get out of debt in these programs? How does this affect a persons credit rating?
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How does a debt relief program work and what are the benefits. How does one get out of debt in these programs? How does this affect a persons credit rating?
January 12th, 2010 at 8:58 am
you pay them a fee and then they never return your calls.
do not get involved.
start paying your stuff off.
make some calls to see if you can negotite old debt, and some companies will be happy to accommodate you.
I used to be a collector and we got a bonus on goal each month. call the first day of each month and the last three days of the month. Why, collectors want to make bonus. In the beginnning of the month and end there is pressure to make that goal, and bonus.
Say you owned $300 and called me we could take a payment of $125 and bring you current. That is one of the reason you will get coopertion. I wanted to make that bonus and goal.
So why pay a thrid party to do what you can to get it cleaned up
January 12th, 2010 at 9:52 am
What usually takes place is the company will negotiate with both creditors/lenders and if applicable collection agents/agencies. They typically can reduce your rate, which ultimately lowers your monthly payments and in some cases, freeze the account from further fees or interest. This can also lower the payments. Next, they will try to work with both you and the lenders to come up with a payment plan that everyone can agree on. Usually, you will first figure out what amount per month can you afford and from there, they try to get all the lenders to agree on an amount so that each payment you make, gives each lender a small portion of it.
Can this damage your credit rating? Yes. It will damage your rating and really should be used as a last ditched attempted before filing bankruptcy. In some cases, Debt Relief companies save people both money and from filing bankruptcy. How bad does it affect your rating? That really depends on how bad it is now… For example, if you have an excellent score now, but go into a debt relief program, you will have a large negative impact on your score for doing so. However, if you have a 450 FICO score, you may lose an additional few points but because it was so bad to begin with – it will only have a minimal negative affect.
I would suggest trying to work something out on your own with each lender. There’s nothing wrong with trying to cut out the middle man and negotiate yourself – if you think you are up to it… You do have an advantage over the lender – you have what they want… Money! So if you can explain to them the difficult situation you are in ( and trust me, with the current credit crisis – you’re not the only one) they may be willing to negotiate with you. You can even try something temporarily. For example, they may be willing to freeze interest or fees for a few months or maybe waive some fees which they’ve already charged you. The key is, you never know what they’ll do until you try them.
Debt relief companies are pretty good at negotiating, but you don’t need to be a pro to get a deal you are comfortable with worked out. When a lender is faced with 2 choices: 1 -they don’t work with you and no deal is made, but because of that, your account goes to collection where they lose 80% of what is owed or 2 -work out a deal where you both are satisfied, and they keep you and your money…
I’m not saying they will all gladly work with you, but if you can come up with something, perhaps they will work with you. On a side note: try to work in the deal (if you try it yourself) to have the creditor not post any negative info in your credit report(s). Remember, no matter what they say to you, the creditor has the absolute right to report any correct information, change it, delete it, or just not report it at all.
I wish I could be more helpful, and hope this was at least a little helpful. Best of luck.
January 12th, 2010 at 3:11 pm
How do they work, you ask? By telling you to pay them monthly & they build up a fund in their bank taking their percentage & the interest from your payments. Then, when your accounts have charged off, they will offer to settle with the creditors. NOTHING will be done on any account before it has charged off.
You get out of debt by them settling your debt for a lower amount after destroying your credit history.
Technically, you might as well file for bankruptcy. It won’t do any worse damage then they will.