When money is tight, and there's too much month left when the cash runs out, those ads about debt settlement start to sound attractive. But there are questions.
Myth: Anyone can get their balance cut in half for any reason.
Truth: Legitimate debt settlement businesses qualify clients. Companies like Christian Debt Network also ask for details about the hardship. Lenders want to make sure a consumer is having legitimate financial problems. "If they're making $200,000 a year and don't feel like paying their bills, that is not acceptable," points out Christian Debt Network.
Myth: You have to pay someone to help settle your debt.
Truth: Abraham Lincoln said, "Anyone who represents themselves has a fool for a client." The same works with debt settlement. You wouldn't file for divorce without an attorney, why would any rational person try to navigate the arcane and intricate laws surrounding debt settlement without an experienced negotiator working for them? Qualified debt settlement companies know the percentage each creditor is likely to agree to. The professionals have more leverage with creditors.
People often confused debt settlement with debt consolidation. They are two different animals.
In debt consolidation, the consumer continues to make monthly payments — to a third party who takes a cut —and the debt consolidator passes what's left on to creditors.
In debt settlement, the arrangement is similar — but different. The consumer continues to pay monthly payments but to the settlement company instead of the creditor. The settlement company has negotiated a lower amount acceptable by the creditor and keeps the difference as compensation for the legal work.
While debt consolidation is a relatively new concept, debt settlement has been around for thousands of years. The idea only became popular in America in the late 1980s as bank deregulation loosened consumer lending practices.
Keep praying, and in all things, even when in debt, give thanks to God. "Give thanks in all circumstances; for this is God's will for you in Christ Jesus" (1 Thessalonians 5:18).