Concerning Debt Consolidation…
With so many individuals and families mired in debt—and sinking ever deeper as the days pass—it's easy to see how the rapidly expanding debt-consolidation market has grown into a multi-million-dollar industry. The seductiveness of easy credit has lured countless numbers of unsuspecting consumers into its trappings of fine print, higher interest and long-term payments. Once inside, solid financial footing begins to give way to a quicksand of installments and revolving balances due, which can eat up a family's resources at breakneck speed. It's no wonder, then, that when an apparent lifeline is thrown their way, many people eagerly grab it.
But let's take a closer look at that "lifeline" to see if it's actually worth betting your financial well-being on. We've all seen them: They often come wrapped in such enticing ad packaging as "Consolidate all your bills into one easy payment," "We negotiate with creditors to lower your payments by 50% or more," or "Easy debt relief in just 30 minutes!" When up to your eyeballs in payments and not knowing which way to turn, these programs can seem like just the solution to save you from going down for the third time. And, it's true; they can stop the debt collection calls and give you some respite—at least temporarily.
However, if you're at all interested in the whole truth, there are many more of these debt consolidation organizations that are of, shall we say, dubious quality, than there are solid and reputable ones. And if you want to go the full distance with this truth thing, no debt consolidation company can accomplish any more for you than you can do personally—if you're so inclined to do it. Therefore, the real question becomes, do you want to pay someone else to do something that you can actually do for yourself? Of course, only you can answer that for you with 100% accuracy.
But that doesn't mean you're not entitled to a couple of pointers to help you reach a decision. First, when debt consolidation companies say they negotiate with your creditors, in many instances the negotiations have already been done. That's why you've probably also heard them say they work with thousands of creditors. In other words, there's most likely a prearranged discount already in place with a particular creditor.
However, there may still be times when they'll actually have to roll up their sleeves and do some serious negotiating with one or more of your creditors. But consider this: if the creditor already isn't getting any money from you, don't you think they're in more of a frame of mind to make a deal so that they can at least recoup some of their money? Of course, they are! That's precisely the premise that the debt consolidation companies operate on. And it's one that you can use just as effectively. Creditors are often much more willing than you think to give a break on interest or fees, or reduce the total amount owed, or make some type of concession so that they can start receiving some type of payment from you.
Second, you should also keep in mind that debt consolidation companies are in business to do business—in other words, they exist to make a profit. Yes, there are some organizations that are non-profit, but the vast majority are in it to win it—the money, that is—regardless of how caring or helpful they may sound.
So, who pays them? Well, the simple answer is, "both you and the creditor." They'll often charge you a monthly fee for their services, but they'll also receive a commission from the creditor for every payment you make. And since they often may have added an extra ten-percent or so onto the monthly payment you're required to make, the creditor will happily kick a commensurate amount back to them. Therefore, if you really want to wax technical about the question of who pays—as in most other consumer-oriented dealings, you do.
Debt settlement isn't some ethereal concept that only professional companies can implement. With the proper information and desire, you can do the same thing for yourself that they can—and for free (which savings you can also apply to your debt to pay it off even quicker).
Of course, some may have no taste to negotiate with their creditors. So, if you choose to use the services of a professional debt consolidation company, just remember to check them out thoroughly, including references and any complaints that may have been filed against them. Remember, too, that debt consolidation can take other forms as well, including refinancing or home equity loans (if you own a home), personal loans (if your credit is good), refinancing a fully paid-for car, or borrowing from family or friends. Of course, that last one can at times be just as harrowing as anything we've discussed here. But that's another subject, for another time…