Does consolidating payday loans work
However, there are negative consequences and risks to debt settlement and other debt management options.It adversely affects your credit, perhaps not as much as bankruptcy, but still significantly. Debt settlement does not always mean a large debt reduction – or any reduction. You can pay 15 to 30 percent of the amount of your debt in order to have it reduced.While this should be standard for any ethical company, untruthful claims in this industry are a violation of the law.They should be able to back up any claims they make with statistical fact.
This money is then used by the debt settlement company to pay off any debts it negotiated down for you.
Debt Management Program Some companies create a personalized step-by-step plan to help you get out of debt, then enact it for you by taking a monthly payment from you to send to your creditors according to the plan.
In this case, the company does not wait to reach a settlement but starts paying off the debts right away, although it may still also negotiate debt reduction. All involve a legal process, which means hiring a lawyer and going through credit counseling and debtor-education classes.
For example, if they say the program takes only a year, they should have proof they have helped other customers in similar situations that quickly.
When a payday loan creditor is calling and making threats, and the interest on the loan piles up, it's easy to grasp at any straw to get out of the debt.
This option does not hurt your credit rating as deeply as other programs do. Bankruptcy absolves you of your debts, but at a high price to your credit and your reputation. Regardless of which option you choose, these forms of debt settlement are not ideal.