Just how do debt settlement companies work? And where do they get all the money to advertise on national TV all the time? Find out if it’s better to use a debt settlement company or if you can settle your credit card debt yourself.

The debt settlement company will make big promises such as reducing your unsecured credit card debt by 40 to 60%, eliminating debt collection calls, and having you debt free in 36 to 48 months.

And what is the charge for all these wonderful services?

Usually it’s around 15% of your total outstanding debt and most of it is due up front before you see any results from their services.

The FTC is currently reviewing the practices of a lot of debt settlement companies and will soon decide on whether or not to eliminate the upfront fees charged by most debt settlement companies.

In the past, debt settlement companies used to work on results. They would get paid when they were able to successfully negotiate with your creditors and get your balances reduced.

Now, it’s rare you will find a debt settlement company willing to offer their services on a results basis.

So what do the debt settlement companies actually do for you?

Once they sign you up, they will establish an automatic draft out of your checking or savings account which will start paying their fee and maybe putting some aside in your settlement funds.

They will direct your credit card companies to contact them for questions about your account.

And after they have enough money in your settlement funds they will try and work out a deal with your credit card companies.

The only problem is that most of the money you are paying for the first 6 to 12 months is paying only for the debt settlement company’s services and not building up a settlement fund.

This is a big problem because during the first six months you become delinquent on your credit cards you will usually get some of the best settlement offers from your credit card companies.

Working with a debt settlement company is also likely to  increase the likelihood of you getting hit with a lawsuit from one or more of your credit card companies. This is mainly due to some of the unsavory practices by many debt settlement firms.

This is how debt settlement companies work.

While there may be some benefits to using a debt settlement company, there is nothing they do that you cannot do yourself. You can negotiate and settle your credit card debt on your own with each individual creditor and get the best settlement offer possible.

You can also minimize the likelihood you get sued by any one of your creditors.

You also save thousands of dollars which you would normally have to pay to a debt settlement company to work on your behalf.

You can learn everything you need to know about how debt settlement works and how to get the best settlement offers from your creditors using the Zipdebt program.

And it won’t cost you anywhere near what a debt settlement company would ask for their services as their fee.

Thanks for reading,

– Adam