[Related content:Reduce your debt by 60%! Stop collection calls! Be debt-free in 12 months!

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. You pay the negotiated amount in a lump sum. Some companies promise to lower your debt by as much as 70%.

The incentive for lenders is that they salvage at least part of what they’re owed.

Prices vary, but a company might charge you up to 20% of however much you owe. So the fee for settling a $10,000 loan might be $2,000. Fees are usually demanded upfront before a settlement is delivered.

More from MSN Money

• When debt settlement makes sense
• Fix your 5 biggest money mistakes
• 6 ways to fend off debt collectors
• Insider’s guide to debt consolidation
• Debt: And you think you’ve got it bad?

Apart from the fact that a settlement might never be secured, the offer is riddled with traps (more on that later).

You should know that the BBB automatically lists all debt-settlement companies under its new “inherent problem” category, meaning the bureau has concerns about the entire industry.

Companies can apply to be removed from the category by demonstrating they deliver on their advertising claims. None has been removed yet, though some are in the application process.

Some better alternatives

The bottom line is that there’s no need to hire anyone. You can negotiate a settlement directly with your lender.

“They have a complete picture of your finances. They will know if you’re a candidate,” said Gail Cunningham of the National Foundation for Credit Counseling, or NFCC, a nonprofit group based in Silver Spring, Md.

Before you even reach that point, however, be sure to exhaust all other options. A negotiated settlement comes with serious consequences and should be a last resort.

If you feel overwhelmed, ask for a free consultation at a nonprofit credit-counseling agency. You might be able to develop a budget that lets you meet your debt payments if you work with a counselor.

You can search for a local agency through the NFCC or the Association of Independent Consumer Credit Counseling Agencies.

If a tightened budget doesn’t do the job, a debt-management plan might be in order. This is when you and your lender agree to more-manageable repayment terms, usually over a longer period.

The credit-counseling agency will likely charge a monthly fee of about $20 to work out a management plan, but the fee can be waived if it’s unaffordable. The plan will be noted on your credit report, but it won’t hurt your credit scores.

You could also try negotiating a loan modification directly with your lender. Banks have gotten more flexible about adjusting terms in the past year or so. A modification can include a lower interest rate, the elimination of fees or a reduction of the monthly payment.

If you decide that a debt settlement is your only option, call your creditor directly. Some credit card companies refuse to work with settlement firms, Cunningham said. So if you hire one, you might be throwing your money away.

The terms of the settlement will vary depending on the size of your debt, your financial circumstances and your credit card company. Your lender might ask about your income, assets and other debts to determine the size of your settlement.

A lump-sum payment is usually required, but you might be able to pay the amount over a couple of months.

The repercussions

Hiring a debt-settlement company won’t stop the collection calls. Even as a company tries to negotiate, collection notices can still arrive, interest and financing charges can rack up, and your lender might even sue you.

Aside from the fees you pay, the total amount of your debt is likely to grow, too, if a settlement isn’t reached.

And it usually takes about three years to complete a settlement, said David Leuthold, the executive director of The Association of Settlement Companies, an industry group of about 200 debt-settlement companies. That’s because clients typically don’t have enough money to pay the settlement amount demanded by the creditor right away. So the settlement company will run interference while the client saves up that money.

Video: How to balance your debt

The strategy might not make sense to a lot of people. But Leuthold said people nevertheless use settlement services because they’re daunted by the prospect of dealing with creditors on their own.

It’s not all roses even if you do get a settlement. It will be marked on your credit report for seven years and can hammer your credit scores.

Coming regulations

The Federal Trade Commission is reviewing regulations for the debt-settlement industry. One proposed rule, for instance, would ban companies from taking fees before services are rendered — a common practice now.

“That’s before you know whether anything is going to be successful,” said Susan Grant, a spokeswoman for the Consumer Federation of America , an advocacy group based in Washington, D.C. “In some cases, it’s quite possible that no results are achieved.”

How to deal with debt collectors

New York Attorney General Andrew Cuomo last spring launched a nationwide probe into the industry. As part of the investigation, an Arizona debt-settlement company was ordered last month to pay nearly $200,000 in penalties for defrauding customers in New York state.

Cuomo said Nationwide Asset Services had failed to deliver on promises to reduce debts by 25% to 40%. The attorney general said fewer than 1% of its 2,000 New York customers saved that much.

At the very least, the case should be a warning to anyone considering debt-settlement services.

Published Nov. 12, 2009

When buying a property, many people completely overlook transaction costs. These include:

Points and fees for the loan

Escrow and title insurance

Inspection fees Attorney fees

Commissions

Additional “garbage” fees that lenders and escrow agencies tend to throw in If you’re not careful, they can easily add up to more than you’re prepared to spend.

Your total closing costs as a buyer should usually be between 2 and 3 percent of the value of the property. Get all quotes in writing. And get a Good Faith Estimate (GFE) from your lender before you commit to a loan. Okay the estimate before you pay an application fee. Make sure taxes and impact fees are correct. Be fair, but negotiate whenever possible. You could realize considerable savings

Become a Real Estate Investor Seminar! 

1. Boost an emergency fund.  Nearly 50% of Americans say they’d be insolvent in one or two months if they lost their job.²  That’s a scary statistic in a time of high unemployment. Primerica suggests clients try to save at least six months’ worth of expenses so they won’t have to touch retirement accounts or home equity in the event of an emergency.
2. Pay down high‑interest credit card debt. This is the best investment a family can make right now.  If a card holder is paying 19% in interest, eliminating that debt is like giving themself a 19% return on their money!
3. Direct deposit the refund for the future.  The IRS now allows people to take advantage of direct depositing their tax refund directly into an IRA.  Instead of spending the refund, it’s a great idea to put that refund “to work.”  Clients can contribute up to $5,000 in 2009 and $6,000 if they are age 50 or above.³ 

I am just wondering WHY we don’t teach financial skills in school anymore? Is it because the teacher’s don’t understand fiscal managment? Have we lost our “fighting skills” in terms of saving?

My mom’s generation went to the bank on Friday and put at least 10% in the bank and lived on what was left. Where did this common sense go?  You definately get what you focus on and my concern is that we don’t focus on financial INDEPENDENCE. No one knows when they will be out of debt. We don’t even think debt is a problem. We need to get back to saving for our future, owning our homes or at least, living within our means. My goal is to improve my own savings rate and get a better ROR on my investment…ie get my fiscal life back!!!!

1). Debt Stacking: Paying each credit card in a way that actually pays off the credit card rather than just keep paying the minimum. I have seen folks who pay just $25.00 per month extra and they save $1,000′s on interest and truly get out of debt YEARS earlier!

2). Stop giving uncle SAM a FREE loan each month. Look at other ways to increase your revenue stream using the rule of 72 and escrow your own homeowner’s taxes so YOU earn the interest, not Uncle Sam!

3). Find a Pre-foreclosure specialist who can help you get out of the foreclosure before the bank sells your house. The BANK can’t negotiate with you, however, they can negotiate with third party. Use the third party to your advantage. You may have to lose some equity in these deals however, you will retain your credit to find your own good deal on a house. These Pre-foreclosure specialists can help you also find low cost housing as either a rent to own or an outright purchase at hundred’s of thousands less interest dollars than you were paying on your existing house. Stop bemoaning your situation and email me at pattisoutherland@hotmail.com for more information or call 206.999.5640 and ask for Patti

4). Get a financial needs analysis done so you REALLY know if there is something you can do to fix you finances. Just becasue you can’t think of a solution, you can go to an expert for FREE and get an analysis done.

5). Look at ALL options. If you are afraid of losing your home, look at a Mortgage modification as a LAST resort. Remember, the BANKS do NOT want to modify unless they are forced to. Pay for Pre-Paid Legal (one month is only $30.00 with administration fee) to have an attorney assess your current situation for very little expense.

My thoughts:

1. Do an Financial Needs Analysis (FNA)  to find out where you stand.

2). Talk with an Pre-paid Legal attorney after the FNA is complete.

3). Look at all your options including loan modifications and Pre-foreclosure specialists.

Need help? Just email: pattisoutherland@hotmail.com

KNOWLEDGE is Power.

 GET MORE INFO but don’t get STUCK in paralysis by analysis!!!

____________________________________________________

To make writing web content more painless than ever, Wordtracker has teamed up with pro journalist Rachelle Money to bring you “The Web Content Recipe Book.” Presented in cookbook format, this unique e-book contains 25 easy-to-follow “recipes” for writing everything from blog posts to company histories to product reviews.

What’s Inside the Book?

In “The Web Content Recipe Book,” you’ll discover how to:

• Find riveting and creative ideas for your web content
• Write killer blog posts that inspire your target audience
• Create a viral video marketing campaign that sends sales through the roof
• Compose a thought-provoking press release that attracts priceless publicity
• Start a debate and cause some controversy – without damaging your reputation
• Convert mistakes into readable and profitable copy
• Track down and interview an expert
• Publish your own survey
• …and more!

Each recipe features a list of “key ingredients,” hot industry tips, and examples of similar content – everything you need to start writing with confidence. Best of all, you don?t have to read the book from cover to cover – just flip through and find the information you need!

Limited Time Offer ? Save 34%

Buy “The Web Content Recipe Book” today and get the special pre-launch price of $19 – that?s $10 off the official price of $29! You’ll be able to download the book immediately after purchase ? and you can start using what you’ve learned right away to transform your website!

To learn more about this fantastic e-book and order your copy at nearly 34% off the regular price, simply click on the link below:

https://www.wordtracker.com/offers/quick-pay.html?offer=recipe-offer

Rent to own housing is your perfect solution. Rent to own is an arrangement between a home-owner and a renter-soon to be owner in which a portion of the monthly rental fee is put down toward the purchase of the house. This can be up to 50% of  the monthly rental fee. This is a perfect solution for a home-owner who has equity in his house but can’t refinance to lower the monthly payments and would like to sell the house due to lack of or loss of monthly cash flow due to down-sizing, out-sizing or right-sizing etc. It is also a perfect arrangement for a renter who doesn’t have the down payment or doesn’t have enough credit to qualify for the purchase of the house. With the market in a flux, this may be a solution for many. For more information, contact Pete Olson.