Dealing with Debt

Dealing with debt can be difficult, especially if that debt is high-interest debt such as a payday loan. While you may be able to pay off a payday loan rather quickly, it can be tough to deal with other sorts of debt like out-of-control credit cards.

Because so many people find themselves in a tough spot right now, there are many companies offering services to help you deal with debt. In some cases, these companies are legitimate and helpful. In some cases, they’re shady, operating within the law but in an unethical fashion. In other cases, they will lie to you outright.

Whenever you hear a sales pitch from a company that wants to help you deal with debt, you need to listen carefully. Here are some warning signs:
Dealing with Debt
Watch out for overpromises. Yes, some companies can help you to pay off your debt for a smaller amount than what you owe. Watch out for a company that guarantees that it will happen, however. There is no guarantee that any given creditor will be willing to accept any sort of partial payment. Instead, contact your creditor yourself, and find out if they have options for you.
Pay attention to fees. Some debt reduction companies charge a hefty fee. Even if they claim it’s only a “small percentage” of what you’re paying, find out exactly how much those fees are. Whether it’s a regular monthly service fee, a fee for establishing an account or a final fee.
Keep communication open. If a company tells you to stop communicating with your creditors, watch out. You may still wind up with late fees, interest and other charges. Your credit score may also be hurt.
Be realistic. If a company tells you that creditors won’t sue you for not paying on an unsecured debt, be careful. Creditors can and do often sue. If they win a judgment, they can even garnish your wages.
Know how credit reporting works. If a company claims that they will “fix your credit report,” they aren’t being exactly honest. The only way your credit report can improve is if you ask the credit reporting company to correct errors and if you do better about paying your credit.…