How do I compare two debt consolidation companies?

I interacted with different debt consolidation/settlement companies and different people are quoting different prices. How do I decide which one is better? What paramters should I consider?

These are the paramaters I am considering
1) Monthly fees
2) Attorneies
3) Experience in the industry etc

Should I consider the break up of fees too? Please teach me how to compare two debt consolidation/settlement companies?

Thanksies ..RachelMar

What your needs from a management company will be different for everyone. Your list is a good one. I would also ask when do they start paying your creditors?? Do they field the calls from the creditors?? Also please check each one out with the BBB to see if there have been any complaints filed against them and how they were handled. Also are you doing settlement or debt management?? Read up on the differences so you can make informed decisions. Good luck!!

I would check not only the BBB...but google the name of each one and see if there are any posts on the internet.Consider everything you want out of this before you sign with one.
Best of Luck

Besides the good advice stated above..remember a debt settlement will not pay a creditor until they have a full amount to offer them. As for a consolidation they will be sending payments monthly to each creditor and you should see the results on your statements. Whatever decision you make be sure the montly payments or savings they suggest will fit into your budget...or it may not work at all.

Also - if you decide to do debt settlement, many people have done this on their own and saved quite a bit in fee's. There is alot of help on these boards with letters and info on settling the debt yourself. I have settled two of my accounts so it can be done. If you don't have alot of accounts to settle this may be an option as well, but as laura did mention, you usually need to save up and have the amount ready before you settle, so debt consolidation might work out better and save your credit more than Debt settlement would.

I would set up a list in writing and then call each one for a cost break down.After doing this check with the Better Business Bureau,their Attorney General,and their State bar if a attorney is involved to get a good look at their reputation.

I would also suggest to sit down and really think about the amount of debt you have vs. the amount any debt settlement company will charge you to take care of it. Do you have a significant enough amount of debt to justify paying what the settlement company is asking?

Also, please seriously consider the advice given above - these folks are very well-versed in debt settlement.

All of the above advice sounds good to me. I haven't had much experience with debt consolidation, but by reading, I'd also want to make sure that all of your creditors would deal with the one you choose. I have heard of some creditors not settling with consolidators. How much debt is involved? Are any taxes you owe included in this amount?

You are right to ask for a breakdown of the fees. With debt consolidation, the fee is usually pretty minimal (i.e., $50 a month). debt settlement companies usually charge on average, 15% of the total amount of debt you are placing with them to settle. When you start making payments, some companies apply them towards their fees first, then once they're paid, the money you are paying out goes into your settlement account until you have built up enough funds for them to start negotiating the smallest debt, then they work their way up as and when the money in your account increases.

I have found that since these settlement companies are getting their fees from the get-go, they have no incentive to work hard for you, or go that extra mile for you (i.e., fending off the creditors). Also, I have a problem with the companies that want you to let them save the money for you. That's how people get burned and lose their money. There are companies that instruct you to open a savings account, and they figure up how much you'll need to put in the account each month to get your debts settled in the time frame they quote you. You have to be disciplined to do this.

One of the above posts mentioned that debts can be settled on your own and you save money by not having to pay a company fees. I TOTALLY agree with this. I successfully did this after getting scammed and only wish I'd taken this approach from the beginning.

Also, keep in mind that when you do debt settlement, the company you work with cannot prevent you from being sued by one or more of your creditors. When you go so long without making payments to them, they charge-off the debt and it goes to collections. The collectors are suing debtors for judgments fairly quickly after debts are placed with them, so this is something to really consider.

You need to make a list of what you can do on a monthly basis along with how long it would take you to pay it off and then how long it would take you to get the money and to settle out your debts at 60%. I say 60% even though I think you would get around 40-50%.

If you do choose to go with a settlement or counseling service please do your research on any company. I've seen so many people come across my file that had been duped or didn't get exactly what was promised.

Above all, put your rent, house payment, food, kids, etc above all else when you think about a monthly plan for creditors. Those are above all else, not some unsecured creditor. Most important, I'd consider your third point, that is - most experience in the industry.

When checking into a company with FTC, BBB, AG, etc... I'd give more weight to complaints [less is better] than I would to praise [more is better]. My reasoning is that complaints are more likely to be genuine, or have at least some basis in fact. We've seen on this board how easy it is for a shill to leave hollow praise or misleading comments.

Of course, I have a nasty, suspicious mind. Your mileage may vary.

Welcome Rachel--The advise given is what I would say,also. I have seen alot of people come to the boards and didn't ask some of the question that need to be asked, and found themselves in a bigger mess.

I am with SueBee- how much debt are you talking about?
I did alot of my debt myself-but I did not have a tremendous amout compared to some here. The CC companies eventually worked with me and I was able to pay them off-they dropped the interest on a hardship program.

Just make sure and do your homework-fees, hidden fees,how long--everything others have said to you and research the company.

Good Luck to you--please feel free to ask questions--and we would love to have you join the Community karen

Hi Rachel,
With debt settlement, the industry standard for fees is 15% - 25% of the total amount of debt you bring into the program. Find out from the company’s website or by calling them how long they’ve been in business to determine their industry experience. Although debt settlement has been around for many years, debt settlement companies have only been around for about the last 10 years. Debt settlement used to only be handled primarily by hiring an attorney, and after a client pays the lawyer’s fees, he or she has saved very little or no money from taking this debt relief avenue. Along with reviewing each company’s BBB rating, check out their membership rating on The International Association of Professional Debt Arbitrators (www.iapda.org). This indicates the company’s level of commitment, professionalism and ethics.

Once you are enrolled into a debt settlement program, funds have to build up in order for a settlement to be negotiated. This means that several months may go by without any payments to your creditors. debt management, on the other hand, begins paying your creditors with your first installment by distributing pieces of it to all of your creditors. This method takes considerably longer, and you end up paying back 130% or more to your creditors, plus it is more damaging to your credit report in the long run due to third party assistance showing up on your record. Now, debt settlement gets your debt balances to zero in about three years or less. Basically, debt settlement can hurt your present but it definitely helps your future, whereas debt management can help your present but damages your future.

Debt settlement negotiates the total principle down to about 30 to 50 cents on the dollar. The debt arbitrators do not wait until the full amount is available before they begin the negotiation process; they begin when there are adequate funds in their clients’ accounts to offer settlements. Creditors unwilling to settle is very rare, especially when dealing with experienced debt arbitrators. Creditors can either agree to take the settlement offer or risk receiving nothing, or next to nothing, if the client files for bankruptcy.

The debt settlement company will assist you in creating a separate Special Purpose Account for your deposits into the program, and this should be solely in your name. Do not trust companies that suggest otherwise. Also, 100% of your first several contributions into your account should not go to the company’s fees. Your funds need to begin to accumulate immediately and a reputable debt settlement company will provide a worksheet that shows you how much go to fees and when you will be completed paying the fees. The companies that do this will generally work harder on your behalf to earn those fees.

Good luck to you!