Your Choice Should Put You In the Best Financial Situation Possible
Financial service companies spend (literally) billions of dollars each year on advertising. A significant portion of that money is dedicated to one highly profitable set of customers: people in debt. Although being in debt seems like the opposite of profit from your perspective, many financial companies see your misfortune as their opportunity.
If you’re looking for debt relief from credit cards, medical bills, and other unsecured debt, certain companies will take advantage of you. These companies don’t want to help you settle your debt. That wouldn’t be good business for them. They want you to work with them, take out more loans, and pay more interest.
You might be thinking, “Why would I ever do that?” The answer is this: If you don’t avoid the red flags, you might fall for one of the many misleading ads that are aimed directly at you.
Know the Red Flags to Avoid When Seeking Debt Relief
In relationships, people often talk about red flags, or the behaviors that indicate that a potential partner might not be a good fit. Similarly, when you work with a business that offers a debt relief solution, you have to consider whether the relationship will end in crisis or success.
Look out for companies that use language like:
- “One easy payment.”
- “Simplify your payments.”
- “Debt consolidation.”
- “Let us pay off your debt.”
These are red flags. These companies want you to consolidate your debt, not get rid of your debt.
What Do Red-Flag Debt Consolidation Companies Want?
Debt consolidation is the act of taking out a loan to pay off your total (“consolidated”) debt in installments with interest. Behind the scenes, the company offering you the loan slowly pays off your creditors, with the promise that they’ll no longer bother you.
Why Is This a Red Flag?
A company like this isn’t providing relief from debt. They are asking you to create even more debt by taking out a loan. These companies often take too long to pay off your creditors, so you leave yourself open to a lawsuit. A creditor may get impatient with how long your debt consolidation company is taking to pay them off, and they’ll come after you, not the company.
What Are the Green Flags For Debt Relief?
The green flags in a relationship are signs that another person is worthy of your love and affection. When seeking debt relief, follow the signs that let you know your solution is trustworthy and has your best interest in mind.
Instead of “debt consolidation,” attorneys and other trusted professionals will use phrases like:
- “Cost-effective.”
- “Debt settlement.”
- “Pay less than what you owe.”
- “Negotiation.”
These are green flags because these companies have a debt settlement plan that can help you pay significantly less.
What Is Debt Settlement?
Debt settlement is a negotiation between a professional, like an attorney, and your creditors, on your behalf. You end up “settling” by agreeing to pay less than your total debt. In this scenario, you’ll pay a lump sum to your creditor or pay them in installments over a short period of time.
Why Is This a Green Flag?
You may be able to reduce the amount you have to pay by up to 50%. Your creditors will be happy, too, as they will receive more than the scarce payments they are currently getting from you. However, you need a debt settlement expert to help you with the negotiation. You need someone who knows the law, your rights, and a strategy that will get your creditors to accept your settlement offer.
Are There Situations Where Red Flags Can Turn Green?
Weighing the pros and cons of debt consolidation or an attorney for debt settlement comes down to this question: What is the most cost-effective plan for you? Paying 50% of what you owe through negotiation is far less money than paying back a consolidation loan plus interest.
However, certain factors like how much you owe and whether you have a lump sum available to settle will determine what solution you choose. There may be situations where you don’t have a lump-sum payment, and you have to try an alternative to debt settlement. You’ll need to find your own green flag – the solution that is going to get you out of debt the fastest, for the least possible amount of money.
How Do I Figure Out What’s Best For Me?
To find the debt solution for your situation, look for:
- Resources from the bank where you hold an account: Check to see if your bank, or a bank you trust, publishes articles that describe various debt solutions and how to take advantage of them.
- Articles and resources from the Federal Trade Commission (FTC): The FTC posts helpful articles on debt-related topics, including how to avoid debt relief scams.
- A knowledgeable and understanding local attorney: If you want to speak with someone personally, explain your story, and get strategic legal advice, look for an attorney in your area who is an expert in debt settlement and debt consolidation. Attorneys often offer free consultations, so you can find out if you’re eligible for their help.
You can also read these articles to get answers to your other debt-related questions: