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Is Debt Settlement Too Good to be True? Two Red Flags to Watch For

Anyone who has been wading through pools of debt for any length of time knows the stress and disruption it can bring to your daily life.  After a while, all you want is a solution to your problem, and an end to all the phone calls, bill statements and craziness.

Enter the debt settlement company. A debt settlement company can negotiate with your creditors on your behalf to help you get your financial situation under control and get those debts paid off faster.

Sounds too good to be true, right? In most cases, it most certainly is, but there are companies out there that are willing to put your best interest at heart. Here are two warning signs that a debt settlement agency might only be in it for themselves.

Lots of guarantees

If you are being guaranteed everything under the sun right from the start, take it as a big red flag. Some debt settlement companies will guarantee that all of your creditors will settle for a lesser amount. They guarantee you’ll be debt free by a certain date or they guarantee you’ll only pay ‘pennies on the dollar’ to get it all worked out.

Guarantees might make you feel better about your situation, but in reality, there is no way for any debt settlement company to know if all your creditors will settle ahead of time. And since they can’t know that, they also can’t know how long the process is going to take.

They want all your money

Some debt settlement companies instruct you to stop making the payments on all your various debts and just give them the money instead. The premise is that once you’ve built up an amount that they consider good enough, they will approach your creditors and offer it to them as a lump sum settlement. The idea is that the creditors will accept the lump sum and your accounts are marked as paid in full.

Of course, the main issue with this strategy is that your credit rating is being damaged the whole time you aren’t making payments to your creditors. Not to mention, the creditors may not even accept the amount being offered. If the company is also charging you high fees for this service, it’s a surefire sign you’re in the wrong place.

What to ask a debt settlement company

If you’re shopping around for debt settlement services, ask a lot of questions and find out right from the start how they plan to attack the problem. Be sure to also check with the Financial Consumer Agency of Canada (FCAC) and the Better Business Bureau (BBB) to find out if the company you are looking to send your hard-earned dollars to is actually reputable or has any complaints made against them.

If you get into a conversation and it sounds more like a marketing presentation for their services instead of an actual plan to help you, go elsewhere

Debt settlement alternatives

If you’re in debt, what you really need is a debt management plan, not a bunch of promises and guarantees that may or may not come true. At SolveYourDebts.com, our credit counsellors will create a custom debt management program for you, along with an easy-to-follow budget you can use to accurately track your finances over time.

We are also a non-profit organization, meaning that everything we do is in the best interest of our clients – not the bottom line.

It takes a lot of hard work and discipline to work your plan – but living debt-free is achievable if you are willing to work for it. Contact us today for a free consultation on how you can get your debts settled.

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