Becoming debt-free is a noble financial goal!
There are many options for achieving this financial milestone. There’s the good, the bad and the ugly. You may devise a long-term strategy to eliminate debt by paying cash for all future purchases while making on-time, minimum monthly payments until the debts are paid off.
Here are some actions steps you can take:
A DEBT SETTLEMENT PLAN IS NOT A DEBT MANAGEMENT PLAN!
These plans are usually offered by for-profit companies to people with large amounts of credit card and student loan debts. Here’s the plan: The debt settlement company promises to negotiate with their client’s creditors to pay a “settlement” or a portion of the money owed to the creditors to settle the outstanding balances. This is Part 1 of the plan. Part 2 of the plan states that the client must pay a specific amount monthly into a designated account for paying off the settlement amount. This process is usually lengthy and carries a fair amount of risk.
Should your debt settlement company be unsuccessful in convincing the client’s creditors to accept the settlement, your balances may grow even higher with late fees and finance charges because these programs may encourage you to cease direct payments to your creditors while the negotiations are being worked out. Be aware also that there are dishonest debt settlement companies who make promises they are unable to keep, charge large sums of money and in the end you may be worse off than when you started on the debt settlement path.
Before signing with a debt settlement company, you must have some important facts upfront:
Please get answers to these questions in writing and thoroughly review for understanding before signing!
To know whether you are dealing with a debt settlement scam, here are some red flags:
Check out any debt settlement company you may be considering by contacting your state’s Attorney General’s Office or the local Consumer Protection Agency (in New York, DCA/Department of Consumer Affairs). Also check out what people are saying online about the debt settlement company you may be considering by entering the name of the company into a search engine using the word “complaints”.
As stated at the beginning, debt freedom can be liberating, giving a sense of control over one’s finances and imparting financial confidence. However, due diligence is necessary before choosing this strategy for becoming DEBT-FREE!
NYC Department of Consumer Affairs
Bureau of Consumer Frauds & Protection
Denise Garrett is a financial counselor at the LDCENY and has more than 25 years experience in financial counseling and retail banking.