Let me begin this review by telling you that I know exactly what you’re going through. In 1997 I found myself deep in debt. To be frank I don’t know how I got there because the purchases were small. $15 here, $35 there, I didn’t go on a Hawaiian vacation or put the down payment for a new car on my credit card, it just crept up on me from dozens and dozens of innocent purchases. Debt consolidation was not even on my radar a year earlier, true I had a few balances back then, but I was paying them on time and they were small and very manageable payments.
The problem is that debt is like cancer. A few cells at first, but they grow, and at 19% they grow quickly. I started to use my credit cards to pay for things I used to pay for with cash because I needed the money to make the minimum payments on my debt balances. One evening I knew I had crossed “that line” when I put the bills in a pile and stopped taking calls from 888 telephone numbers. My wife was no help, she kept telling me everything was fine. “We earn a good income, so we can keep up – don’t worry,” but I knew better. I tried to put it out of my head but it affected my everyday life. I was inattentive at work, uncomfortable in my own home and scared the children would find out.
My story didn’t end well. I went to a lawyer for options and she told me that I needed to declare bankruptcy because I was “too far gone.” In late November 1997 I walked into court, faced a few creditor representatives and signed the paperwork to declare Chapter 7 bankruptcy. For the next ten years of my life every job application I filled out and every credit line request was met with a disapproving stare from the person on the other side because most applications asked the question – have you ever declared bankruptcy? I missed out on some great job opportunities and paid much higher rates because I took “the easy way out.” It turned out it was not easy at all – I wish I had considered debt consolidation.
Debt Consolidation in a Nutshell
A creditor has three choices when you can’t or won’t pay. 1) take you to court; 2) sell your debt to a collection agency; or 3) try to work out a different payment arrangement – typically taking a lower payment by:
- lowering your debt,
- extending the time to repay, and
- lowering the interest rate.
Realistically, taking you to court is unlikely. It costs a lot of money to sue someone and lenders face many, many people who can’t pay. If a bank such as Citibank extends 10 million credit cards a year and 2-3% of them don’t pay then they’d have 200k-300k court cases going on across 50 States. That is a lot of expensive legal power cost expended only to find that the debtor has no assets – they know this.
Option 2 is to sell your debt to a collection agency. Collection agencies make their money by executing flamboyant money collection strategies – making angry phone calls to you at work through your switchboard even if they have your direct number. Sending you letters with pink paper inside so that you and the mailman both know what you’ve done. I even had one show up at my doorstep (with his wife!) one time during my 1997 personal financial crisis – the two dogs scared the bejesus out of them and they left almost as quickly as they came. The reality is they have no better rights than the original creditor, just more aggressive tactics.
This leaves the third option – frankly, probably the best for you and them (outside of getting repaid immediately). Trying to work out a different payment arrangement. You could do this yourself, but we estimate that 90%+ of the people who choose this option use a debt consolidation service. Why? Because they don’t have to face the creditors directly and frankly it’s easier to hire someone who does this all day, everyday to navigate the waters. The creditor and the debt consolidation agency work through the details in a dispassionate, “it’s just business,“ manner to come to a conclusion. Then it’s done and dealt with.
How Do Debt Consolidation Companies Get Paid?
While many debt consolidation companies are non-profit, they make a lot of money. Payments come from the overall payment to the creditors – remember the creditors generally WANT a structured and more certain repayment stream from a client who has been bad at making payments, so if a debt consolidation company is brokering a deal so that the creditor can get paid, it’s worth reducing part of the debt and lowering the interest rather than selling the debt for 40 cents on the dollar.
How Do You Choose the Right Debt Consolidation Company?
There are 10 areas that most people focus on:
- Professional Advisors
- Reduced Debt Negotiation
- On Line Tracking Tools
- Free Online Quote
- Low/No Monthly Service Fees
- Flexible Payment Schedules
- Money Back Guarantee
- Online Enrollment
- Deals with Secured Loans
- Deals with Unsecured Loans
Below please find Hot Ten Review’s ratings for the Best Debt Consolidation Companies of 2016.
National Debt Relief is our #1 choice. NDR is recognized as the leading debt relief organization in the United States. Here’s what we like:
- A+ Rated by the Better Business Bureau
- Over 1400 five star reviews by Trust Pilot
- Performance Based Fee – They don’t get paid until your debt is renegotiated
- Get you out of debt in 24-48 months
- They know the laws surrounding debt negotiation
- They set up a secure trust and build it up with automatic payments, so you don’t need to worry about making your deadline for your settlement payment.
- They keep the pressure on your creditors – not you. Keeping in constant contact with your creditors is one of the things that convinces them you are trying to settle your debts rather than avoid them.
- They create a payment plan you can live with and afford.
- You can access the money you’re saving for your payment in the case of an emergency, and they’ll help you figure out how to restructure your payment plan so you don’t have to deal with major consequences.
- Reasonable rates that won’t get you back in debt. By the time they get your reduced settlement, their fee has paid for itself and then some!
To learn more about National Debt Relief, click the link.