Rather than look for debt relief grants and other things that might miraculously erase your debt, you might think about debt settlement. It is something you can hire a company to do for you or something you can do yourself.

Debt settlement is just what it sounds like: you agree to settle for less on the amount of debt you owe to a company. The incentive for the company to settle is that they will get something from you rather than face the real possibility of getting nothing. The tricky part though is how to do it.

You can always try to bargain with companies that you owe money to. After all, it doesn’t hurt to ask and it costs you nothing to try. You might have heard stories where people bargain with their phone company over charges their kids rang up and they ended up only having to pay part of the bill. Again, it is free to ask and tell them your situation.

If you are going to try to settle the amount you owe yourself, you will need the money to be able to pay the company if you are successful. For instance, if you owe $1,000 and are able to settle for $800, it won’t look good if you then have to reveal that you don’t have the $800 either. Why would they settle if you don’t have the money at all so you need to be able to pay the amount you hope to talk them down to.

No company, credit card or otherwise, would ever want you to know that they might settle. That is why you never hear them giving you that option. What I have just explained is the do it yourself debt settlement option that may or may not work for you.

Professional Debt Settlement Companies

If you don’t want to do it yourself, you can always enlist the help of a debt settlement company. But make sure you understand that this does not mean your problems are over. These are private companies that have no authority from the law to protect you. Your debt is still your debt and your problems are still your problems.

The advertising some of these debt settlement companies put out is often very misleading. They may make it sound like it is a sure thing that they can help you and that you will be able to cut your bill from anywhere from 25% to 75%. Promises are one thing but can they really do it?

One thing that you need to know is that you will have to pay for the companies services and it will be hard to figure out exactly how much. Every company may have a different way of calculating the fee: from charging you a percentage of your overall debt to others that charge a percentage of what they save you. But for most of them, you will be paying monthly fees as well as a one time sign up fee.

Debt relief and debt settlement companies have been getting complaints for years associated with the promises they make and the fees they charge. The problem has become bad enough that the FTC has had to step in and make new rules. You can read about the new rules that have gone into effect today October 27, 2010 here and see the excerpt below:

First of all, I have no indication whatsoever that they are a scam. In fact, I have never read anything bad about them anywhere. My big complaint with them was that no where on their site could I find a price. Yes, there is a free trial but it didn’t even tell you how long the free trial lasts. If I am going to sign up for something I want to know BEFORE I BOTHER SIGNING UP how long the trial period is and how much the service costs after the trial period ends.

In response to my first post, someone who claimed to work for DebtGoal left this comment:

DebtGoal is only $14.95 per month after the trial period is over – a discounted price of $11.95 is offered to members who sign up from from preferred partner sites including this blog.

We aim to put our price upfront in the registration pages clearly and in bold letters so our members know when they will be billed and how much. Clearly, we are not meeting this objective – we’ve taken your feedback and will put price info in all the right places.

Bhawna Guglani

The good news is that the monthly price of $14.95 is now clearly written in the print towards the bottom of their DebtGoal.com sales page under the heading “How Much Does DebtGoal Cost”. It is great to see a price right there for everyone to see before they sign up for the free trial!

So after all this, is DebtGoal.com a scam? Again, I have personally never tried them but they did add their price to the landing/sales page in response to my concern. That was great to see and it means they are responsive to suggestions and complaints. I have also looked throughout the Internet and have not been able to find any substantive complaints about them anywhere. It looks to me like they are 100% above board and they are an option you might consider if you are having trouble managing your debt.

The government is forever trying to protect us from unscrupulous marketers and apparently they think debt consolidators fall into that category. Debt relief companies will no longer be allowed to charge fees before they perform their services. It seems debt relief is a grey area where companies make big promises of eliminating your debt or at least a big portion of it and then charge an up front fee for the service. According to the FTC, the promises are often not kept and the end result of their “service” is much different than what was originally promised. With the up front fee though, they already have their money and of course the person who paid the fee is then in a bigger financial hole than they were to begin with.

Under the new ruling, debt relief providers cannot charge a customer anything until a successful negotiation has taken place involving the settlement or reduction of the customers debt. Simply put, if the debt relief company is successful in helping a client reduce their debt, only then can they charge for their service. There will have to be lots of new written agreements in place so that the fee can be charged after completion of the debt reduction service.

So many people are in credit card debt right now and this bad unemployment isn’t helping any. The economy looks to be in a funk for many months ahead as no end is in site. This is causing more people than ever to search for debt relief grants and any other type of debt relief they can find. They hope to get Obama debt relief or some other kind of handout, giveaway, or help from the government but there isn’t anything like that. At least now, starting in a couple of months, they won’t have to worry about being fooled into paying for debt help from a company that might not be able to deliver on it’s promises.

How to enroll in an online debt relief program

At first, you need to fill out an online form. Then, a consultant (on behalf of the debt relief company) will call you for a free session in order to assess your financial situation. After assessing, the consultant may suggest a debt settlement program if it is the best suitable option for you.

What happens in a settlement program?

As you enroll in a debt settlement program, the debt negotiator (on behalf of the company) will start communicating with your creditors to reduce the total amount you owe. In the meantime, you will have to deposit a monthly amount into your settlement account with which you can pay your creditors as soon as they agree upon a pay off amount.

It may happen that an online debt consolidation and settlement company offers a consolidation program to you if it is suitable for your financial condition. It is advantageous over settlement as consolidation has a positive effect on your credit report.

What happens in a consolidation program?

In a consolidation program, the debt consultant (on behalf of the company) will negotiate with your creditors to reduce the interest rate of your loans/debts. With your creditors’ approval, he/she will also decide upon a monthly payment that you need to pay towards your debts. After you make the payment, the company will distribute it amongst your creditors.

It is quite important to choose a good online debt consolidation and settlement company to pay off your dues. Therefore, check its membership with TASC along with checking the company’s reputation from BBB (Better Business Bureau) to know whether or not there are any complaints against the consolidation and settlement company.