Red Flags For Debt Settlement Companies

Consumer CollectionsDebt settlement companies provide their clients a valuable service, but as with any industry, there are some firms that use fraudulent practices. There are several red flags that are associated with these firms, and this can help consumers find the right company. Debt settlement is a way that debtors can arrange for a third party to pay off an unsecured loan. Payments are made to a debt settlement company who holds it in a trust account. This account accumulates and can be used to make a lump sum payment to the creditor. Many firms charge fees for their services, and the amount that's charged should be clearly understood. The payments may also be made for several months, and a consumer should be sure they'll be able to pay for the entire term.

Most firms charge a fee for their services, and it's usually a percentage of the debt settlement amount. Different firms vary the amount they charge, and a smart shopper checks around. There are a variety of red flags that should alert debtors to be wary of certain debt settlement companies. Fees that are excessive should be avoided.

The terms of the payment is another area that can raise red flags. Most of the terms that debt settlement companies offer run from 12 to 60 months. Debtors are in trouble because they have trouble making their payments. If a consumer is unsure of their ability to pay for the entire time, or the term seems far fetched, this can provide the debtor a chance to reconsider. There are reputable firms that provide their clients with a valuable service, but consumers should ensure the company, they hire, is the right one.

Debt settlement can benefit consumers, but there are many firms that take advantage of people's situations. Luckily, there are a variety of red flags that consumers can use to recognize fraudulent practices. One of the first considerations is the fee that a debt settlement company charges. This is usually a percentage of the debt, and a smart consumer shops around to see what the market bears. Another issue has to do with the terms of the payment plan. Terms that are unusually protracted should be avoided. Many people are unsure of what the future holds, and long terms can lead to trouble. There are many reputable debt settlement companies that provide a valuable service to their clients, and they can benefit debtors.

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