Are you having trouble keeping up with your credit card payments? There is a plethora of companies out there anxious to help you. They promise they can negotiate settlements with your credit card companies that will get you 40 to 60 percent off your balances. These promises are very enticing but know what you are getting into before you sign for one of these debt reduction plans.
These claims may all be true, but be aware that your credit score will take a severe hit. Also, be aware that they charge a hefty fee to set up the plan (about 18% of your total balance). Although this fee is not paid upfront directly, it is part of the settlement.
You must completely divorce yourself from the credit card companies and you must make payments to an escrow fund. The debt reduction company takes a hefty portion of the payment and maintenance fees take the rest for several months. None goes toward the escrow account and the balance remains at zero for several months. When there is enough money in the escrow account, the debt reduction company will begin negotiations with the credit card companies. Meanwhile, some credit card companies will harass you with numerous phone calls. If you have caller ID, you are instructed to let these calls go to voice mail.
So you can see that you will endure several months of uncomfortable waiting and watching your credit score plunge while avoiding your creditors. If you are a conscientious bill payer and like a good credit rating, this may not be for you. Evaluate closely before you sign.
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