Many consumer magazines and financial media, provide reviews of companies that handle debt reduction, but a lot of people are still confused about the authenticity of such companies and often fear getting swindled. In the post recession era, as a result of their ability to successfully reduce the debts of their clients, companies provide consultancy and advice to clients for debt consolidation or reduction.
Economic Recession and Debt Settlement Companies
The economic recession from 2007 to 2009, shook the consumer sector of the United States economy. One of the sectors that bore the heat was the sector of consumer credit and loans. During the recessionary cycle, economic conditions forced companies to shut down or conduct mass lay offs. In such a situation, millions of people lost their jobs, and there were no alternative ones to cushion the blow of unemployment.
These people who were laid off, had borrowed money from lenders, banks and credit card companies. In such a scenario, the unemployed people were deep in debt and had no jobs. Apart from that, there were many instances where lenders and companies had slapped huge late payment fees and service charges on people who had defaulted the date of their payments. Thus many American consumers found themselves in neck-deep debt with no way to get out.
In such cases, two probable solutions were seen, namely, file for a bankruptcy or get a debt reduction company to help you out of debt. The latter one is obviously the better option but the more difficult one to execute.
Services Offered by Debt Reduction Companies
These companies offer their clients a set of services against which they charge a requisite commission or fees. Some of the prominent debt assistance services that are provided by such companies include the following:
- Credit Counseling: People who are caught up with a credit card debt, as well as loan installment, can undertake credit counseling. Here, an expert in the field of finance, takes counseling sessions with the people and explains the right procedure of repayment.
- Debt Consolidation: Credit card debt consolidation and loan debt consolidation are basically loans that are secured and tend to have a low rate of interest. The company, provides the loan so that the debts can be paid off, and the client has to return the remaining consolidation loan to the company.
- Debt Negotiation: Debt negotiation which is also known as a debt settlement, is a service where the debt reduction company negotiates a reduced repayment amount with the lenders and credit card companies. This is the most difficult, and also the costliest of all services, as it results into debt relief and write offs.
These procedures can also be done by you on your own, however, it's a much difficult task. Before you enroll for any debt settlement programs, that are offered by companies, take a look at the Federal Trade Commission's guidelines regarding the company's licensing.