If you have decided that debt settlement is the best way to approach your debt situation, then the next thing you need to do is decide to do it yourself or to hire a third party company to do it for you. Here are three critical reasons why consumers, professionals and small business owners should choose the do it yourself debt settlement method instead of hiring a company.
1. Save lots of money
Almost all debt settlement companies charge a flat fee for their services, usually 15% of your debt amount, regardless of how they perform for you. Also, they require you to pay these fees upfront, typically over the first 12-18 months. Most will also charge a monthly account fee of about $40 for as long as you’re in their program. In total, you’re talking thousands of dollars in fees and they don’t have any incentive to negotiate your settlements as low as possible. And since the fees are paid upfront, over the first year and half usually, most of your monthly payments are going towards paying their fees instead of being saved up for future settlements.
A few debt settlement companies charge a set-up fee and a percentage of how much they save you. These companies will also charge you a monthly account fee of about $40 for as long as you’re in their program. The set-up fee is about 5% of your debt amount and the “savings” fee is about 25% of how much they saved you. The only good thing about this fee structure is they have a built in incentive to get you the lowest settlements they can. The bad part is you’ll be paying them thousands of dollars in fees which could have gone towards your settlements.
The bottom line is this: no matter how a third party company calculates their fees, it will cost you thousands of dollars for something that you can do on your own. And equally important, since you’re paying them thousands in fees, it will take you longer to save up for settlements and get out of debt.
2. Retain flexibility
By handing your own debt settlement program, you’ll be able to adjust for the usual ups and downs that most people experiencing financial difficulties will typically endure and it won’t interfere with your progress. Third party settlement companies require fixed monthly payments and will drop you from their program if you can’t make the same fixed payment month after month without interruption. None of these companies can match the flexibility of handling your own debt settlement program because you are saving money in your own account for future settlements with your creditors.
So if an unexpected expense occurs one month and leaves you with nothing to set aside, it won’t be the end of the world. It just means that month you weren’t able to add to your future settlements fund. No matter what, you have full control over your program when you do it yourself and it can bend to accommodate you if need be.
3. Maintain better creditor relations
Creditors prefer to deal with their clients directly and if you do so, you can foster an atmosphere that will lead to favorable settlements. A big problem with third party debt settlement companies is they routinely claim that they can stop creditor phone calls, which is completely false. No one can. But they will do things like send your creditors cease & desist letters, which are either ignored outright or accelerate the collections process, which can increase the chances of filing a court action against you.
Another advantage of doing your own negotiations is getting better settlements from certain creditors. There are a few creditors out there that really bristle at third party companies because they see them as wedging themselves in between the creditor and their clients. In particular, they dislike the how the majority of debt settlement companies advise their clients to ignore all communication from the creditor for several months and then attempt to swoop in at the last minute with a low-ball settlement offer. Most creditors view these tactics as adversarial and prefer dealing with the clients directly. When you conduct your own program, you can manage the overall communication with your creditors in a more productive manner than a third party company ever will.
The advantages to handling your own negotiations are too good to ignore. You’ll save thousands of dollars which will allow you to settle your accounts much sooner, you’ll have full control and flexibility over your program, and you’ll minimize potential credit backlash by not getting caught up in the heavy-handed techniques that third party companies use.
