Question:
Dear Steve,
I have credit card debt and private loans and I keep getting calls from many debt settlement companies.
I want to see if these companies are legit and are truthful, so I wanted to see what the legalities are and see if the programs there really offering me are really beneficial and can truly help my situation. I would also love to know the pros and cons if I do move forward with a debt settlement program, any help would be great
John
Answer:
Dear John,
Credit card debt relief tools like debt settlement are one of the solutions you can use to deal with debt. That’s not in dispute. What is in dispute much of the time is if the debt settlement solution is being pitched to you in your best interest or just to close a sale.
There are two major issues you need to keep in mind.
1. Sales Filter – Generally the sales person who is reaching out to you is a commissioned salesperson who is motivated to sell you their widget so they can make money. You need to filter all the promotional messages through that filter. That commissioned salesperson is not a financial advisor, they are a salesperson. Just take a look at recent job openings naming debt settlement and see what skills and experience they are typically looking for. You’ll see job descriptions that include, “We need salespeople who have sold successfully in the past and know how to close with a consultative approach” or “We are growing, We Need Closers!”
2. Run From a One-Size-Fits-All Recommendation – If any company is selling you a one-size-fits-all solution with debt settlement, I’d be inquisitive. As I mentioned before, debt settlement is a tool that can work but it is best utilized in the right situation. It might not be right for all of your debt. So what I suggest you look for is a company who can create a custom solution based on your current overall financial situation and future financial goals.
You can compare your general debt relief options by using my online calculator. This will give you the pros and cons about each option.
If you want to check out any company that is contacting you then maybe my free guides below will help.
In a perfect world the person you decide to work with to deal with your debt should consider a number of factors, including how much you have in an emergency fund and what is your plan for retirement savings. This is particularly important if you are not really saving for retirement now. Enrolling in an extended debt repayment plan, like debt settlement or credit counseling, can wind up costing you a substantial amount of money in lost savings when you will need it most. You can use this calculator to see how much you would lose.
The best framework I can give you is to think about your situation like you are coming into an emergency room and not feeling well. If an emergency room doctor was trying to sell you an arm cast for all your ailments, you’d think that was ridiculous. What you would expect would be for the doctor to examine your situation and come up with a custom treatment plan based on your overall situation. Then to bring the right tests and resources together to treat your individual symptoms and problems.
Right now you might be drowning in debt and need an emergency room financial doctor to evaluate your situation and prescribe a financial treatment plan to deal with each of your debts using the right tool or solution.
If you have a credit or debt question you’d like to ask, just click here and ask away.