Debt settlement is an effective way to pay off your debts, but why do most debt settlement programs fail?
If youâ€™re struggling with credit card debt, you might be thinking of enrolling into a debt settlement program. The monthly payments look attractive, but the selling point is the fact that you may be able to pay your creditors about 50% of what you actually owe!Â Everything sounds great on the surface and you feel like you may have found a program to finally get you out of debt.
However, one must tread with caution when enrolling into a debt settlement program.Â Â According to the GAO (source), theyâ€™ve found that less than 10% of consumers successfully complete the program. Â Donâ€™t get me wrong, Iâ€™m not here to write a negative review about the effectiveness of debt settlement.Â In fact, I think debt settlement is a great option to get out of debt for those who are fit for it.Â Hereâ€™s why most debt settlement programs fail:
1.Â Â Â Â Â Â Cutting off communication:Â If you speak with a debt settlement company, they might tell you that they will send out a cease and desist letter to your creditors to stop the harassing phone calls.Â This strategy is setting you up for disaster.Â If a creditor isnâ€™t able to get in contact with you, their next steps may be to escalate your file straight into their legal department.Â This is an outdated practice that could result in a lawsuit.
2.Â Â Â Â Â Â Enrolling improbable creditors-Â I encourage you to call a debt settlement company and tell them you have a Discover and Capital One credit card.Â If the debt settlement company has any idea what theyâ€™re doing, they SHOULD tell you that these creditors have a high likelihood to sue and their settlement rates arenâ€™t as attractive as other creditors.Â When a creditor decides to sue you, your only option may be to file bankruptcy.
3.Â Â Â Â Â Â Sugar Coated Programs â€“ Keep in mind that when you speak with a debt settlement â€śspecialistâ€ť, you are not talking to a financial counselor. Â You are speaking with a sales representative who is concerned with â€śclosing the deal!â€ťÂ They will say anything to get you in the door, even if it means bending the truth a little bit.Â After being in the program for 4-5 months, many consumers finally realize what a mistake theyâ€™ve made.
4. Â Â Â Â Over extended term â€“ Imagine having a $450 monthly payment on $50,000 of debt for 60 months.Â Typically with $50,000 in debt, your monthly minimum payments would be over $1,200/month.Â Itâ€™s tough to walk away from this deal isnâ€™t it?Â The whole point of debt settlement programs isnâ€™t to save money every month, but instead to get out of debt as fast as possible!Â I would never recommend anyone to enroll in a program that will last over 36 months.
Final Thoughts on Debt Settlement Programs
These are just a few reasons why most debt settlement companies fail.Â The biggest advice I can give you is to do your research!Â Thereâ€™s never a â€śone size fits allâ€ť approach to debt relief.Â Make sure you look at all the different options before you enroll in any program.Â SpringCoin provides a free evaluation to help you determine which solution may be right for you. Â You can also contact your creditors as well, and ask for a credit card repayment plan.If you have any questions, feel free to submit a question, Â and I will help answer any questions you might have!