Transcript: Credit Counseling or Debt Settlement?
Anchor intro: You've seen the ads: credit counseling
companies promising to lower or wipe out your debt. Bankrate.com
takes an inside look at exactly how these companies can help.
Voice-over 1: If you're in debt trouble, you've
got plenty of company.
Voice-over 2: And you've got lots of people
willing to help you too. For example, credit counselors.
SOT: "A credit counselor will work with
the client and reduce the debt over time, and you will pay...in
many cases...a lower interest rate or no interest rate at all."
Voice-over 3: So a credit counselor gets between
you and a creditor, tries to negotiate better terms and sets up
a plan to repay all your debts over time, generally three or four
years. And the cost?
SOT: "Generally between $10 and $50 a month."
Voice-over 4: But credit counseling isn't the
only game in town. Debt settlement is also popular: That's offering
to pay a one-time lump sum of less than you owe and wiping out the
debt in one fell swoop.
SOT: "Debt Settlement...the argument for that
is you can negotiate the debt, hopefully at a lower, reduced amount...pay
it off once, and be finished with that creditor and never have to
worry about it again."
Voice-over 5: So with debt settlement, you
or someone you hire is negotiating with the creditor to pay a chunk
of what you owe and have the rest of the debt forgiven. Costs for
this service vary widely, from a couple of hundred up.
Standup: Either of these methods might work
depending on your circumstances. But if you're hiring help, be extremely
careful: there are bad apples in both camps, and they're not always
easy to spot. For Bankrate.com, I'm Kristin Arnold.