Few things in life are more stressful than being in debt and drowning in it. Because being in debt is a highly stressful situation, it's no surprise that a lot of people get taken in by debt relief companies whose claims are often just too good to be true.
Every year, these dubious debt relief companies take advantage of people who are already in debt. These people end up even deeper in debt even after they pay out thousands of dollars for the debt relief they hoped they'd get but never do.
Don't be a victim of debt relief scams. Your best defense is knowledge. Know the most common debt relief scams out there and learn how you can avoid them.
Debt Settlement Scams
In a debt settlement scam, you'd be advised by the debt settlement company to stop making payments to your creditors. Instead, you'd be instructed to deposit the payments into a new account while the company's agent negotiates with your creditors regarding the payoff. In the meantime, the company is taking its fee from the newly created account.
Does debt settlement really work? Yes, it does…but only if the debt settlement company is legit and really doing what it's supposed to do for you.
Often, though, these companies do nothing but engage in fee collection, all the while you're just getting into deeper debt and losing money that you could have been paying toward your actual debt.
So how do you tell if the debt settlement company is legit or a scam? A tell-tale sign that they're not a company to do business with is if they refuse to give you details regarding any aspect of just how they work to settle your debt. If a company is being vague, take that as your cue to find a different debt settlement company.
Debt Consolidation Scams
In a debt consolidation scam, you pay the company a fee up front and then they don't deliver anything or worse, they disappear.
You shouldn't have to pay any company any fees upfront before any service is rendered. If a company requires that you provide them personal information before they give you a quote, that's a red flag as well.
You shouldn't have to give them your social security number or bank account information just so they could quote you their fee. The only information that any debt consolidation company should have in order to give you a quote are: how much debt you owe, your creditors, and the interest rate.
Credit Repair Scams
If you need help repairing your credit, you'll find reputable companies. Again, you shouldn't have to pay them anything just to look at your situation.
Similar to debt consolidation scams, credit repair scams simply collect money from unsuspecting victims and don't deliver any work. While you're being interviewed, you'll be asked to provide them your bank account or debit card information. Whatever you do, never give these out to them! They don't really need these in order to give you a quote.
If you give out these vital pieces of financial information, don't be surprised if they start taking money out of your account. And don't be surprised too if it's next to impossible to get them to stop.
What's the Solution?
For all these three types of debt relief scams, there's really only one solution: Don't give them more information than what they actually need…EVER!
Remember, a company doesn't need to verify your identity or get your financial information unless a formal agreement has been reached.
You should never pay fees up front. The initial interview is always free. This is standard practice by the legitimate and reputable debt relief companies. Don't pay any company anything until you have actually hired them.
Verify the reputation of the company. Check the Better Business Bureau to see if any of the companies you're considering have had many complaints filed against them.
Information is power, and you can easily find the information you need online, so use it. If you do your homework, you should be able to find a company that can truly help you get out of debt.
Or here's another solution: you can help yourself as much as you can. You might even do a better job than most firms in negotiating with your creditors or repairing your credit. There are many resources available online so use them.
You'll find debt relief scams wherever you go. These companies target the desperate. Your best defense is knowledge. Thoroughly check out any company before hiring them.
Better yet, give the Attorney General's office in your state or the Better Business Bureau a call. Make sure they’re legit.