There are many places you can turn to for debt consolidation services, but some resources aren’t as effective as others. In particular, businesses that offer debt relief may not be doing as much as you expect in terms of alleviating your debt. Before committing to using any type of service, it’s important to understand what those services will and won’t do for you.
How Does Debt Consolidation Work?
Typically, debt consolidation companies want you to fall behind on payments because this will motivate the creditors to negotiate. Instead of paying your monthly bills, that money will go to the debt relief company you use. A portion of that money will be used to cover the service fee, while the majority will go into a special savings account.
Once the debt relief company determines you have saved enough money, they will offer a settlement to each creditor. This is less than the total amount you owe, allowing you to get out of debt sooner. Once the settlements have been accepted, the service may also charge a contingency fee on the total amount you have saved by using the consolidation service. Other fees may also be applied to your account, so it’s important to fully understand the terms of service.
What Do Debt Consolidation Companies Not Want You to Know?
There are a few details that you won’t be aware of when you start working with a debt relief service. First, the creditors will begin tacking on late fees and other charges once you stop making payments. This will cause your total debt to increase. Additionally, creditors are not obligated to negotiate for a lower settlement, and many of them won’t reduce your debt.
Secondly, creditors often become more aggressive with customers that use debt consolidation service. The creditors may add more penalties to your account or file a lawsuit against you that much sooner. In financial terms, it can actually be more affordable to simply pay off the debt than to hire a debt relief service.
How Can an Attorney Help You?
In some cases, debt can mount so high that it can seem impossible to pay anything more than the applied interest. In these situations, hiring an attorney may be a wise course of action. An attorney can analyze the situation and advise you on how best to negotiate with the creditors.
If the situation worsens, you may be faced with lawsuits initiated by the creditors. Since your lawyer is already familiar with the circumstances of your case, they will be prepared to defend you in court. Alternatively, your lawyer may recommend filing for bankruptcy before a suit is filed. While this is an option of last resort, filing for bankruptcy can provide you with the relief you need.
When it comes to debt consolidation, it’s always better to hire a lawyer who knows the ins and outs of any financial situation. The Gil Law Firm has been helping clients in the Houston, TX, area obtain debt relief for almost two decades. A consultation with Rafael Gil III will help you understand more about your debt relief options. View the firm’s website for more information on their services, or call (334) 673-0100 to schedule an appointment.