Today, debt settlement is undoubtedly the greatest remedy for millions of people struggling with insurmountable debt. Millions of students, full-time and part-time professionals, businesses, and even the baby boomers, who suffered tremendously during the recession, now often resort to debt settlement companies to get relief from their skyrocketing debt burdens.
Debt settlement can be a true lifeline for people dying from elephantine debt. However, sometimes, even legitimate programs offered by trustworthy companies may have many loopholes and leave consumers with more debt than what they started with at the beginning. This grave doctrine came up when a new report from Center for Responsible Lending(CRL) surfaced. Center for Responsible Lending (CRL) is a nonprofit, non-partisan organization that works to protect homeownership and family wealth by fighting predatory lending practices. According to them, you should always check carefully before getting enrolled in a debt settlement program and must read the terms of the settlement agreement thoroughly before signing.
Genuine debt settlement programs can make huge difference. Usually, debt settlement companies negotiate with your creditors on behalf of you and try to lower the interest rates, principal, monthly payments, and help you set up a payment plan that comes within your budget. Though most reputable companies keep their promises, most don't! According to the report by Center for Responsible Lending, many debt settlement companies first ask you to default on your payments and cease all communications with your creditors so that they can try out in their ways. However, this sudden inactivity leaves a pretty ugly dark spot on your credit score and financial history.
If you listen to what your debt settlement company asks you to do and default on your loan, it'll be exponentially difficult for you to get any loans, credit cards, or financial products in future. Even if you manage to get any loan or credit card, the interest rate will be very high due to your blemished credit history. The worst part is most of the debt settlement companies only promise to try to negotiate with your creditors. And nowadays, many lending institutions refuse to work with debt settlement companies and budge on interest or payments. So once you default agreeing to what your settlement agent says, you just make your situation miserable. Sometimes, such a blunder practically increases your debt, up to by 20%.
You can check out the reportage by Center for Responsible Lending(CRL) via the link below. As per the report, the debt settlement industry needs serious changes, but for people who are looking to get out of the shackles of debt, it might be better for them to make sure the companies they want to work with don't compel them to default on their loans and moreover, don't sell financial services like selling a consolidation loan, which has it's own numerous problems. If things are in bad shape at your end, remember that though it might be a daunting task, you could do it yourself.