Rising costs and layoffs have meant that there are now more people in debt than ever before and some of these people are turning to debt settlement companies, also called debt negotiation firms, in an attempt to solve their problems. However, before you sign your name to anything you should do some research and take care not to get caught in the scams that are out there.

It is all too easy for the novice to get confused between debt settlement and debt consolidation; they are not the same things. Many debt settlement companies will talk to you about setting up an account and then charge you hundreds of dollars for doing so — thereby adding to the debt that you already have. Debt negotiation services will also charge you a service fee every month, the amount varies depending on the company and on the amount of money that you owe.

Most debt settlement companies do not make monthly payments to your creditors. The money that you give the company is put into a trust account, then they negotiate with the people that you owe money to and when there is enough money in the account pay off the full debt.

You may owe a lot of money on your credit cards and if you stop paying then the credit card companies will add late payment charges as well as the interest accrued on the debt. A good debt settlement company would contact your creditors and try to get the interest frozen so that you could pay off the debt, but most of these companies don’t do that.

If you do decide to use a debt settlement agency then you should ask exactly what they are going to do for you before you sign anything. Many of them don’t make it clear exactly how they operate. They don’t ask for interest to be frozen for example, and they don’t always contact your creditors.

If they don’t contact the creditors and neither do you, then, while you are waiting for your payments to accrue in a trust account so that they can be paid, your creditors will take you to court and they could have your wages garnished. Meanwhile, you are trying to pay off the debt, and pay a monthly fee to the debt arbitration company thinking that you are getting out of debt. In reality you can end up deeper in debt.

Before you get involved with any debt settlement company try contacting your creditors and ask whether they will freeze the interest so that you can pay off the debt more quickly — most will do this for an agreed period, giving you the chance to at least reduce the debt. Some debt negotiation companies know very well that the money they are taking from you every month for your creditors will not cover the debt — especially once they take their payments off of the top.

This is not to say that all debt settlement companies are out to fleece you of your money when you can least afford it, but it does mean that you should take great care that you know what you are getting into.

Of all the things you can do to resolve your excessive credit card debt, the first thing to do is to stop creating more. I’ve seen more than one person get out of debt briefly, only to fall back into it. Start changing those habits. Regardless of how quickly you change your habits, though, if you have the debt, you want to knock it down. Here are some suggestions.

Excessive Credit Card Debt Can Be Discounted

You may be able to settle debts for a discount. When I collected debts for a living, we often took 50% as payment in full, when we thought it was the best we could do. The point is that if you really can’t handle your payments, you may be better off to borrow from family to settle your debts for 20% to 60% of face value. Credit card companies sometimes take 50% or less as payment in full if they are convinced you are headed towards bankruptcy. (Note: this is still possible, but more difficult now with the new bankruptcy laws.)

Send a nice letter explaining your situation, and how you will get the money for the pay-off. Tell them you’ll most likely be filing for bankruptcy, but would like to settle up with any willing creditors before that happens. That let’s them know they may be left with nothing if they say no, and you split your remaining assets between other creditors.

How To Pay Debt Most Efficiently

When trying to dig your way out of debt, always pay high-interest cards first. If, for example, you have $200 budgeted to apply to your cards each month, pay the minimums only on all others, then put the rest of the money towards the card with the highest interest rate. When that one is paid off, work on the next highest.

This powerful technique saves a lot on interest charges. Suppose you have three cards. You would pay the minimum of (let’s assume) $40 on two of them, and apply the other $120 to the highest interest card. When that card is paid off, you continue to put $40 towards one card, and now apply $160 to whichever of the two remaining is the higher interest credit card. It is the fastest way to pay down credit card debt.

Excessive Credit Card Debt – Other Tips

Never buy the credit card insurance. This insurance typically stops your payments when you are injured or unemployed. It’s one of the most over-priced insurances out there, and doesn’t eliminate the debt, but just delays it.

Never buy credit card security insurance. This insurance pays for unauthorized charges when your card is stolen. Since you are only liable for the first $50 if you report the theft in any case, and many cards already have 0 liability, this isn’t needed.

Be careful with consolidation loans. Never consolidate debt into a home refinance unless you have a definite plan for paying the loan off early. 10% isn’t cheaper than 18% when it is for 30 years instead of 5.

If you’ve tried some of these techniques without success, and just can’t seem to do it on your own, consider contacting a credit-counseling service. Sometimes they can help you negotiate lower rates with your banks, and otherwise counsel you on how to reduce your excessive credit card debt.

Consumer credit counseling: let us discuss these debt relief programs and also discuss on whether or not they or do not work; whether or not they are or are not effective; and whether or not there are suitable alternatives to consumer credit counseling.

First and foremost, this type of program is more than the name implies. It is foolish and foolhardy to accept this is only a matter of “counseling”. Because this is not so. Not so at all. For if we can expect this to only be counseling, then I, my friend have a quite nice bridge in the city of Brooklyn that is for sale on eBay. Do you understand this metaphor?

For with consumer credit counseling, these people take action. They make plans. They examine. They make a formula and strategy for the people in debt to become debt free. And isn’t this really more than simply to counsel? I say a mighty and emphatic “Yes we can!”

If one finds themselves behind the 9 ball when it comes to owing money to banks and credit card companies, in debt we shall say, then one is truly sorrowful. But if one can resurrect one’s finances and pull one’s self out of the valley of debt despair, then one has truly achieved something magnificent and worth crowing about. And this is a feather in our hat and our robe.

So let us consider debt consolidation. The consolidating of debts is quite useful for the purpose of paying off debt and becoming a slave no longer to debt.