Breaking Free From The Debt Trap

Many people have faced the unpleasant realization that they are living with entirely too much debt in their lives. The recession toppled many long standing myths about personal finance. Consumers are now emerging from the rubble, shaking the dust from their eyes and facing a new world where what you have isn’t really important if you are in over your head with debt.

The good news is that debt can only hold you back if you refuse to do something about the problem. Getting out of debt is far from easy and in most cases it is a long drawn out battle that few people want to engage in, however it must be done to find financial security. If you are feeling trapped by debt, here are some tips to help you get back on track financially.

• Evaluate the situation- The time to address debt is now. If you have been wearing blinders or avoiding the reality of your financial situation, it is time to face the music and devise a plan to eliminate your debt before you waste any more time and money fighting a losing battle. In order to find out what strategy will work best for your situation you have to sit down with the ever growing pile of bills and determine where exactly you stand in terms of debt and available income. Without taking this first step you cannot move forward toward debt free living.

• Change your habits- Unless you found yourself in debt due to situations beyond your control (sudden job loss, medical issues, divorce, etc) you are probably to blame for your current indebtedness. There is no point in beating yourself up over past mistakes, but you must acknowledge where you went wrong and make a committed effort to change your spending habits and how you manage your finances in the future.

• Compare debt elimination methods- Depending on your current level of debt and resources available to pay off that debt, you have several options to eliminate your debt moving forward. Whether you opt for aggressive repayment on your own, debt consolidation, debt negotiation or even the dreaded bankruptcy will all depend on your unique situation. Compare the different methods carefully to find out which is right for you.

• Take action today- Once you have carefully examined all the options available to you, pick a method and get started today. Each day spent agonizing over what you will do about your debt is another opportunity lost to begin paying it off- on way or another. Do not delay the inevitable any longer and get started as soon as possible.

Getting out of debt is something that each person dreams of, yet many people do not take the necessary steps to achieve. Having too much debt will trap you in a cycle of financial struggle that will never end until you take charge and address the situation. Avoid repeating this cycle indefinitely by facing the debt head-on and working toward eliminating debt from your life forever.

Freedom Debt Relief Review

Freedom Debt Relief has a “Debt Reduction Program” designed to offer a solution for consumers dealing with high levels of debt who are seeking debt relief options. Their goal is to get you out of debt in the shortest amount of time while saving you the most money possible through debt negations with your creditors.

Here are some quick facts about Freedom Debt Relief:

Company Founded: December 2002

Years In Business: 6

Number of Employees: 133 per BBB report/over 500 per website

BBB Rating: F

BBB Complaints: 153 in the last 36 months

Fee Information: Retainer fee/Service Fee

Escrow Available?: yes

Source of Funds: client payments

Fee Structure:Retainer Fee included in monthly payment for first 3-4 months of program followed by service fee for approximately 15 months which is also included in your monthly payment.

Avg. % Settled: They do not guarantee any settlements but strive for 50% of the amount owed.

Refund Policy: yes- if at program completion your total debt reduction is less than 3 times the Service Fees you have paid to Freedom Debt Relief they will return a portion of the Service Fees. The amount of the refund will be calculated so that the amount of Service Fees we retain is equal to 1/3 of your total debt reduction. Retainer Fees are generally non-refundable.

Minimum Debt Required: not specified

About the Company:

Based on information provided on the company website Freedom Debt Relief was founded in 2002 and currently employs about 500 employees based out of three offices located in San Mateo, CA, Sacramento, CA and Phoenix AZ. The Better Business Bureau has a report for this company with a rating of F, noting that the company is currently operating after the founders received a cease and desist order from the Department of Corporation in the state of California. You may read more about order from the BBB here. Other information listed on the BBB report indicates the company received 153 complaints in the last three years with 144 of those complaints currently resolved and 9 that have been administratively closed. Freedom Debt Relief is an accredited member of The Association of Settlement Companies and also has a report available through Dun and Bradstreet.

The Program:

The Debt Reduction Program offered by Freedom Debt Relief is based on an increasingly popular form of debt reduction known as debt negation or debt settlement. Designed for consumers struggling with serious amounts of debt this program is intended to reduce your debt by approximately 50% by negotiating with your creditors for a lump sum payment less than the actual balance you owe. To begin the program you must contact the company for a free consultation to assess your financial situation and determine if this form of debt relief is right for you. If the program is the right fit for your situation you and Freedom Debt Relief will determine a dollar amount that you can save each month toward debt negotiations. Once settlements are made (which will likely take several months to see results) you will be notified of said settlement by a “good news” notification letting you know that debt has been successfully negotiated.

Program Cost:

From the information provided I was unable to determine how the Retainer and Service fees are calculated. If I were to wager a guess based on other companies in the same industry the overall amount would be based on the amount of debt you currently owe since it is paid at the beginning of the program.

Website Experience:

The website is professional and easy to navigate. It offers several pages of information on how debt settlement works. In the FAQ’s section many important factors are covered explaining both the potentially positive and negative results of entering this program. Although the company doesn’t advertise information gleaned from a simple internet search (BBB report) they do provide adequate contact information so that a person interested in doing a more “in-depth” search has little difficulty in finding more information. Since I have reviewed companies that don’t provide these tidbits of information to help individuals looking for more information this was appreciated when looking for more information.

Conclusion

Overall this looks like a company to stay away from.  I base this on a BBB rating of F and a seriously front-loaded fee structure.  If your looking for a more reputable debt settlement company, try Debtshield or Hoffman Brinker.

Paying Off High Interest Credit Card Debt

With the holiday season descending upon us, it is hard to ignore the fact that a new year is just around the corner. Consumers are cautiously optimistic about an improved economy in the coming year despite the number of people who are still struggling with uncontrollable debt. As the economy begins to strengthen during the recovery period, those who are saddled with debt might miss financial opportunities that are on the horizon. Here are a few tips to help pay down debt once and for all. These proven strategies can work individually or combined with the end result the same; getting out of debt.

• Have the right attitude- We all assume money problems are solved by having more money. While having more money is certainly helpful, it is the way in which you manage your money that has the biggest impact on your financial security. Making the right financial decisions requires having the right mindset. Getting out of debt requires sacrifice and discipline as well as a willingness to commit to whatever process you decide to use for debt elimination.

• Apply savings toward debt- No one wants to give up the security of savings in the event of an emergency. In fact, there are conflicting opinions as to whether or not you should cash out your savings to pay off debt. When it comes right down to it, if you have high interest debt you are losing more money each month you carry a balance. Taking money out of your savings account (which undoubtedly is earning interest at a much lower rate) will pay off in the long run as your debt is eliminated.

• Avoid the minimum payment trap- Most people know that paying only the minimum payment is a guaranteed way to stay in debt forever. Unfortunately it is easy to fall into this habit and pay only what is required each month while “extra” money gets absorbed in everyday expenses. Unless you are experiencing a true financial hardship, most people can find ways to save more money each month that can be applied toward credit card payments.

• Contact your creditors- Creditors are often willing to renegotiate the terms of your contract if they feel you are on the verge of not being able to keep up. This is not to say you should lie to your creditors, however you will have to be aggressive in order to speak to someone willing (or able) to help lower your interest rate. Explain that without some cooperation from their end you may not be able to continue making payments under the current conditions, most creditors would prefer to help you repay your debt versus force you into more drastic measures.

• Know when you need help- The majority of people in debt should be able to repay their debt by simply working hard and paying as much as possible each month to bring their balances down. If you are doing everything you can and still see no sign that your balances are going down, you may have to accept the fact that you need help. This may come in the form of credit counseling, debt consolidation, debt negotiation or bankruptcy. Each of these methods have pro’s and con’s which should be considered before deciding which is right for you.

Paying off high interest credit card debt should be your main priority moving into the new year. Each day that you spend money on interest and various fees is a lost opportunity to make money. If you have one New Year’s resolution that you keep, make it the resolution to be financially secure by eliminating debt.

What You Must Know Before Considering Debt Settlement

The economy may be showing signs of recovery, however millions of people affected by the recession have a long road ahead before they find secure financial footing. For some people facing a severe financial hardship, high levels of debt only add to the burden. As a result of current economic pressures there are many companies that offer debt relief services who are experiencing a boom in business. The debt settlement industry (also referred to as debt negotiation) is one of these businesses, with many companies more than willing to help cash strapped consumers. Unfortunately getting out of debt is far more difficult than getting into debt in the first place.  This makes it imperative for potential clients to carefully review both the company they wish to work with, as well as understand the process in general. Without proper research and precaution you could be setting yourself up for additional financial problems at a time when you can least afford them. Here are three things to consider before contemplating debt settlement as a viable option to eliminate your debt.

1. Debt settlement is not a new process. In fact, this process doesn’t even require third party representation, however in some cases, having an experienced professional work on your behalf may get better results. Debt settlement has been around for years and is a legitimate option for those facing a real financial hardship. It is possible to negotiate with your creditors for a payoff that can reduce your overall balance by as much as half, in some situations even more. The basic premise is that creditors are willing to take less money than you owe, versus losing any chance of payment if you file for bankruptcy. 
2. Debt settlement offers no guarantees. If you are looking for a way to get out of debt that has no negative consequences, this is not the process for you. In order for your creditors to entertain a reduced payment or settlement you have to be behind on your current payments. While this is the fact for many people who are struggling financially, it also means your credit rating will take a hit while you are going through the settlement process. Of course if you were already behind on payments this would have occurred regardless, however many people are entering these programs without fully understanding the risks they take. Not only will your credit suffer, you open yourself to the possibility of legal action should your creditors decide not to work out a settlement payment. This may result in a judgment against you, which could lead to wage garnishments or other negative actions taken against you.
3. You must be able to save money for settlements. Whether you work with a company or take the do-it-yourself route, you will still need to have the discipline required to save money for settlements. You cannot put your creditors off indefinitely, which means you will have to put aside as much money as possible each month to grow your settlement funds. If you are unable to save money toward settlements the process will undoubtedly not work for your financial situation.

This process is one that should be considered only by those who have no other way to repay their financial obligations. If you are looking for a way to eliminate debt and avoid bankruptcy, this may work for you, however it is imperative you learn as much about the process, the consequences and any company you work with before enrolling in their program. While there are several companies out there that are helping individuals successfully negotiate debt, there are probably far more that are only adding to a person’s financial difficulty. Check with the Better Business Bureau and online forums to get a better idea how previous clients made out before signing on the dotted line. Education is key to avoid entering a contract that will end up costing you more money down the road.

3 Risks of Do It Yourself Debt Settlement

You’ve heard the ads all over the radio and TV pushing debt settlement programs, portraying them as “secret programs” that the credit card companies don’t want you to know about.  The truth is that what they are talking about is simply the fact that creditors, in some cases, will actually forgive a portion of your debt if you are way behind on your payments.

So the question is: Do you really need someone to negotiate for you? Can you really negotiate a settlement by yourself?  Well, it depends.  Some of these companies are legit, a lot are not, and you can possibly be in over your very quickly if you start demanding forgiveness of debt from your creditor.

There’s several situations in which you can find yourself, but I’ve tried to boil them down into 3 groups of Do It Yourself Debt Settlement Risks:

1. You will be Manipulated and Intimidated

We all know that debt collectors will try anything to extract money from a non-paying debtor.  The extent to which they will go, may surprise you, though.

They will call your relatives, including brothers, sisters and parents, anyone with the same last name in your area, pretending to have the wrong number and ask the person if they know you.  They usually ask that person to “send you a message” that they are looking for you.

Threats work  too, some are indirect like calling on your relatives, but some are more direct, like threatening to take your house away and repossess your property.  Of course they can’t do either, but the goal is to intimidate you and make you feel like you need to do what the debt collector wants.

Although several of their tactics like these are considered illegal, debt collectors will sometimes do almost anything to get you to send in a payment.  And sometimes you’ll fall for it.

2. If You  Are Not Patient, You will Fail

Debt collectors and credit card companies of course want their money as soon as possible, and if you give into their demands too early, you’ll end up not getting a good settlement, or may not get one at all.

No matter how you plead, you’re not going to be forgiven a large portion of your debt by just calling them and asking for it.  Even 30-60 days after you’ve missed a payment. It will take substantial time and missed payments to prove to them that you’re in trouble and serious about reaching a settlement.

3. You need to be  a Ninja Negotiator

Do you know when the right time is to ask for a settlement from a credit card company? What if you pass on their first offer because it’s not enough, how long should you wait for a second offer?  What if there isn’t a second offer? And they sue you?  What then?

Each credit card company has their own rules for accepting a settlement with a non-paying customer. So you’ll need to know the process and be able to recognize the signal that’s it the right time to agree on a settlement before it’s too late. These are skills of a professional negotiator.

What are My Options?

Settling your debt with your credit card company is not impossible, but it can be difficult.  Zipdebt is a great resource to help you get you on your way to a great settlement.  They offer a free 32-page report describing the process and offer two options for do it yourself debt negotiation: An in-depth guide to hold your hand along the way, and an optional coaching process, where you’ll get help from a professional.  If you’d like to pursue this option, definitely check them out.

The other option is to hire a reliable and competent debt settlement company to handle everything for you.  That way you won’t have to worry about the negotiating process and most harassing calls will stop since they will take all the calls for you.  I recommend this company based on their track record of satisfied customers and many successful settlements.  When you hire a debt settlement company, you’ll get a lot of piece of mind and they’ll do everything for you.

Yes, Debt Settlement Will Affect Your Credit Score

When your credit card company offers to take a settlement of your balance in lieu of payment in full to satisfy your debts, you may be relieved a bit to be rid of a debt but concerned about the impact it will have on your future credit. Settling a debt can help make your finances more manageable each month and using a debt settlement company can help you navigate through the process but dealing with the after effects of a debt settlement, generally you are left to your own devices.

What Happens To Credit After a Settlement?
Whether you settle on one or more credit cards debts, there will be other factors that will determine the impact the settlement will have on your credit score. There are four primary factors that will influence your score:

1. The amount of creditors that are reporting settlements to the bureaus as an R5 rating (meaning it’s a settled debt)
2. Your history of late or missed payments on the settled accounts and other accounts
3. The amount of accounts you have on your credit report that show positive activity
4. The average age of your credit accounts

Credit scores are a complex calculation of all of these factors and there is no one way to determine how a settlement, or several, will impact your score. What is important is what you do to prevent the rock-bottom lowering of your credit score. Being proactive about your credit after a settlement can help you keep your credit in better standing. Follow these tips to help prevent a complete bottoming out of your credit score:
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How To Negotiate Your Own Credit Card Debts

If your credit card balances are starting to pile up much too high for you to manage, it may be time to take a step forward and ask for assistance. There are now many resources that are available to consumers who are burdened by too much credit card debt. There are companies that will help you settle your debts with lump sum payments and there are debt consolidation programs that help you reduce your monthly payments. Both methods for debt reduction are effective but not all people will be eligible for or able to commit to such programs.What YOU can do is attempt to negotiate new terms on your credit accounts to make life easier for you.

So how can you reduce your debts effectively when you owe money to your creditors? First know that credit card companies are competing for business and many will be willing to work with you. Don’t be afraid to contact your credit card company directly and ask them to work with you on the following issues:

Negotiate the Interest Rate
Many people fall into financial difficulties because their credit card companies raised the interest rates on their accounts. These high interest rates can be negotiated to a lower rate that will save you money each month. Many consumers do not realize that they can contact their credit card companies and ask for a reduction in interest rates. Cite the better rates at another credit card company and don’t be afraid to consider making a switch if your current company is not willing to work with you.
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American Financial Service Review

Providing debt negotiation services to consumers struggling with debt, California based American Financial Service has been in business since 2003. American Financial Service provides a no cost, no obligation quote for clients considering an alternative to bankruptcy. 

Here are some quick facts about American Financial Service (AFS):

Company Founded:- January 2003

Years In Business:- 6

Number of Employees:- unknown

BBB Rating:- D

BBB Complaints:- 7 complaints, 4 service issues and 3 issues with refunds or exchanges

Fee Information:- AFS has a 15% fee which is calculated on the total amount of debt you have when entering the debt settlement program.

Escrow Available:- yes

Source of Funds:- client payments

Fee Structure:- 1-2 down payments followed by small monthly fees throughout the first year, all cost and fees are disclosed and require signature approval before committing to the program.

Avg. % Settled:- 40%-60%

Refund Policy:- unknown

Minimum Debt Required:- $15,000/$700 minimum per account

About the Company:

AFS is a charter member of The Association of Settlement Companies (TASC), Netcheck, Greater Bakersfield Chamber of Commerce and  the United States Organizations for Bankruptcy Alternatives (USOBA). They have a current rating of D on the Better Business Bureau having received 7 complaints in the past 36 months. You have the option of purchasing a D&B report to learn more about the company.

The Program:

AFS provides consumers the option of avoiding bankruptcy by negotiating a settlement with your creditors, reducing the debt owed by up to 40-60% of the current total. Working for you on a case by case basis, AFS will determine a monthly payment which you can afford that will fund your settlement account. They will communicate with your creditors and assist in dealing with calls from creditors and collection agencies.  Once a settlement has been negotiated and approved by you, that debt will be paid and AFS will move on to the next creditor until all your debt has been settled.  To qualify for the program you must be experiencing a severe financial hardship and have over $15,000 in unsecured debt.

Website Experience:

The website is easy to navigate with all the required information present. The website covers the debt settlement process as well as the risks involved which I always find noteworthy. There are several company websites that do not make the effort to forewarn potential clients of the pitfalls commonly associated with the debt negotiations. While debt settlement is a legal and legitimate way to avoid bankruptcy it shouldn’t be entered into without first knowing all the facts.

Perhaps a personal pet peeve, however I did notice the tendency to repeat information when visiting different pages….or what I thought would be a different page.  While it is not uncommon to naviagte a website and find yourself on the same page from differenct sources, this particular website has two different “about” sections.  This gives the impression that you will be getting more, unique information when in fact you are simply viewing the same information twice.

It is interesting to note that this is the only company that I have reviewed that not only offers client testimonials but also creditor testimonials. This gives the impression that they do indeed have a good reputation which bodes well for future negotiations.

What is Debt Settlement and How Does It Work?

If you are feeling overwhelmed by your debts and find it increasingly difficult to meet your monthly financial obligations, you face some difficult financial choices. One option that many people consider but wish to avoid in filing bankruptcy. Because of bankruptcy’s impact on a credit score and subsequent credit history plus the cost of filing, individuals in debt usually opt to find ways to avoid it at all costs.

One options is to see debt settlement opportunities. Debt settlement means negotiating with your creditors to lower the total amount of money you still owe. There are many debt settlement providers willing to help you through the process, but debt settlement is something consumers can do on their own with commitment and proactive measures.

How Do Creditors Renegotiate?
For a creditor, the threat of not getting any money at all is very real.  Because of this, many creditors will agree to work with you based on your specific financial situation based on the theory that some money is better than no money at all. They are willing to recover as much as they can but many will be willing to renegotiate terms, even if they are not going to get back the full amount of money extended. Creditors are typically will to accept between 20-75% of the original amount you owe in a lump sum payment and forgive the rest of the amount due.  The creditors will then report to the credit reporting agencies that the balance owed has been settled. Keep in mind that while your credit report will show the status as settled, the history of late payments and charge-offs prior to the settlement will still show up on your history report.

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Differentiating Between Secure and Unsecured Debts

There are essentially two basic categories of debt: secured debt and unsecured debt. When it comes to debt consolidation and debt negotiation, the kind of debts you have may determine what steps you can take to help pay down or get rid of your debts.

Here we will look at the two kinds of debts and your ability to renegotiate with your creditors with these debts.

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