US Finance World

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How to deal with debt collectors

The siren song of debt-settlement services is getting harder to ignore these days, especially if your finances are out of control or creditors are knocking at the door.

Tempting as the ads may be, however, debt-settlement companies can leave you in an even worse mess. Many are outright scams.

“If a company’s making big promises, it should raise red flags,” said Alison Southwick of the Better Business Bureau. “Getting out of debt is not easy. It takes time.”

Still, it’s no surprise that people are vulnerable to promises of relief. It’s probably why complaints against debt-settlement services rose by almost 19% in 2008 over the previous year, according to the BBB.

Before you pick up the phone, here’s what you need to know.

How it works

The premise is that debt settlers will negotiate with lenders, usually credit card companies, to whittle down your balance.

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Bill consolidation loans used to be the standard method for debt consolidation, but we have learned a lot since that time and financial experts have decided differently. They are not all bad, but there are several things that you should consider carefully before you go out and apply for a debt consolidation loan.

The benefits

1. Your debts are consolidated and you will only make one payment each month.
2. There is a chance you will have a lower monthly payment, but that usually means a longer repayment period.
3. This debt relief method will not ruin your credit.
4. The interest paid on the loan is tax deductible.
5. Almost any type of debt can be consolidated into these loans.

The disadvantages

1. You must be credit worthy to apply for this type of loan.
2. You will most likely have to secure this loan with your home. So, homeownership is required and defaulting on the loan can lead to foreclosure.
3.

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Cardholders advised to check security of online retailers. Read more…

Shared mailboxes can assist credit card frauds. Professionals who live in rented accommodation in cities face an increased likelihood of falling victim to credit card fraud, according to new research.

A report from CreditExpert, the fraud prevention service from credit reports firm Experian, found that those who rent in London and Glasgow face the highest threat from the scams.

Other contributory risk factors for an individual include working in service industries, living in council or housing association flats and being single.

These trends are partly explained by the fact that many frauds are perpetrated by criminals who intercept mail containing sensitive data such as credit card numbers.

People who rent tend to share mailboxes with other tenants and switch from address to address more often, therefore leaving themselves more vulnerable to these thefts.

Darryl Bowman, director of CreditExpert, said: “Criminals are switching their focus from the wealthy to people whose details they can get hold of more easily. Read more…

The first and best place to start is where most of us are severely exposed: credit debt. If you have too many credit cards with too high balances, mothball a number of them (or cut them up). Commit yourself to a reduced credit diet. Wherever possible, pay off outstanding balances, or at least make required minimum payments to avoid unnecessary fees. And don’t be afraid to contact credit companies to negotiate your way out of tough situations; most credit companies are used to working out mutually acceptable resolution of large balances or delinquent accounts.

Next, know the terms (and potential fees) all of your financial accounts: Savings, checking, ATM use, loans, etc. Then, shop around. Do the homework necessary to compare and contrast your current financial arrangements with those available through other local providers. Y

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