Debt consolidation - No bills in just 12 months?

You have possibly watched ads for agencies that assure you that they can get people out of debt problems seemingly overnight. Solutions to get out of debt in twelve months sound great - the agencies purport to have a crew of financial professionals with decades of past experience who can assist you with your financial trouble. They'll tell you how they can get your creditors to accept less money than you actually owe - perhaps as little as half of your outstanding debt. Many businesses offer to help people become free of debt in as little as one year.

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Getting out of debt in a year's time would be exciting, wouldn't it? Just pay a small monthly payment and your debts will be cut in half! Being financially independent by chopping your what you owe by half does seem smart, until you take the time to ask yourself "Why would my creditors be willing to accept less money than what I owe?" The debt elimination schemes are not really intended to help you become financially free. Debt elimination businesses want only to tap into your money.

How do these debt elimination agencies work? To very quickly eradicate your obligations, several steps are involved. The financial professional will ask you to mail a monthly check to them to cover your bills. The organization might or might not take your monthly fee to them from the total amount you pay them each and every month for your bills. You make an appointment with with the agency and agree to pay some costs right away. A few debtors may believe that these agencies will negotiate your debt with your creditors and pay them from the money you mail them.  In all likelihood, they will just sit on the money, and likely for quite a long period of time. The agency will demand payment; prices will likely include an one time application fee and there will probably be ongoing monthly fees, as well.
 

Debt elimination may seem like a great idea until you realize that your lenders or creditors might not be too willing to accept half of the amount you owe. Your debt elimination company is going to tell you to mail money to them, rather than your lenders or creditors and to pay no attention to any notices from your lenders or creditors. After your debts have gone unpaid for a short time, they will then negotiate with your lenders in order to get them to reduce your total debt. If you have been making regular payments, even if you have only been sending in the required amount, your financial institutions are happy. Credit card issuers make tons of money by way of borrowers who pay only the required amounts. As long as you are making minimum monthly payments, your creditors have no reason to negotiate with you.

There potential problems to doing business with debt elimination agencies. Creditors do not care for not being paid. If you haven't been paying your bills, it is going to harm your credit report. Conducting business with one of these advertisers may reduce your debt problems a little, but you'll find it very hard to get credit again anytime soon. Cash owed that is waived by your lenders will be regarded by the Internal Revenue Service as income that may be taxed, so you'll be responsible for taxes on the debts you did not repay. If you do not pay your monthly bills for any reason at all, you are going to be marked as one who doesn't pay to the credit bureaus.

There are better ways to become financially independent than by hiring agencies that run commercials on late night tv. You might wish to consider seeking out a skilled credit counseling agency by looking in the Yellow Pages.