Should I use a debt settlement company, or pay forever?

Submitted by dianna on Wed, 10/15/2008 - 02:03
Forums

Please help me decide...
I am 50 thousand in cc's. I will be getting a small settlement for 30thousand soon. I am disabled and have been denied disability. Never been late on payments. Score is 720. Should I hire a debt settlement company and try and wipe out the whole 50 with the 30? I was told I must fall behind on my payments which will hurt my score. But it may be better than spending the rest of my life in debt. Is debt settlement/negotiation a good idea for someone with my credit and situation?

I think that since the credit card company has not yet reported the debt to the credit bureaus, you should immediately settle the debt with the credit card company before they report the debt. This is because once it gets listed in the credit report, it will stay there for seven years and hamper your score. Now you said that you are told to fall behind the payments. But can you tell me, who said this to you - the credit card company or the debt settlement company. I don't think that falling behind the payments will help you much, rather it will be misleading.

Wed, 10/15/2008 - 08:52 Permalink

Hi dianna
Since you have a good credit score, I think that you should go for a debt consolidation loan to pay off your debt. Debt consolidation loan will help you to consolidate all your credit card debts into a single loan account which will make it easy for you to repay back the debt. Moreover, the interest rate on Debt consolidation loans are much lower as compared to credit card debts. Now as you said, if you fall behind the payments, your credit score may fall much below 720 and at that time it would be very difficult for you to get a loan to repay back the debt at an attractive rate of interest.

Wed, 10/15/2008 - 09:12 Permalink
Chase (not verified)

Hi Dianna,
Anthony has a great point. But if you do a debt consolidation loan, you are only taking on more debt, as you will have a fee to do the loan as well as additional interest to pay, WHY? Debt Settlement is not as evil as it is portrayed. Granted there are quite a few companies giving the industry a bad name. But there are a few out there that are honest and will do what they say they will do. If you are getting a $30K settlement, you should consider settling the debt. If you go with a reputable company, they should be able to settle that debt for you to about half of what you owe, including their fee. Yes there are credit implications because the the accounts need to be delinquent in order to settle them. If you call you creditors and try and get a settlement with the account current, you will more than likely br denied and if for some reason you get one, you will be lucky to get maybe an 80% settlement. Some creditors are settling for as little as 10 cents on the dollar right now. If you go with the right settlement company, they should have a credit repair program to clean up your credit for you once the accounts have all been settled. Some companies I would recommend looking into are Freedom Debt Relief, RAM Financial Services and Rise Above Debt.

Best of luck to you!!

Wed, 10/29/2008 - 00:27 Permalink

(Just 'general' advice here..) When people decide on Debt Settlement Co's, usually there IS somekind of 'downpayment' and fees to their programs. And, many tims...you DO go more in debt trying to get OUT of debt. It's sad to see because so many people want to try and them themselves out the the 'bad debt' cycle.

Mon, 05/16/2011 - 00:26 Permalink