As the economy gets worse, consumers are using credit cards and getting deeper in debt than ever before. To help out, presumably, many companies are starting to offer what they call debt consolidation programs. However, before using one of these services, be aware of your options. Some of these programs tend to cause even more trouble for the consumer.

Before hiring one of these firms, it’s important to understand that there are two major ways to reduce your debt, and you don’t need to pay anyone to help you do it.

These debt consolidation methods should be tried first. Having your interest rates reduced will never affect your credit adversely! All the other methods will.

The companies that promise to help you consolidate your loans may not be doing you the favor you think. Even though they promise to contact all your creditors to arrange better deals and payment plans, many don’t even do that! They charge you a fee, collect your fee, and do nothing for you. But, to make it seem like they did earn their money, they will send you an entire list of these alleged deals they made, new payment amounts, and phony names with whom they allegedly made these deals.

What happens is that you now start paying these new amounts and suddenly find you are being hounded by dunning letters and collection agencies because you are severely overdue on your bills! Why? These deals were never done. Contact was never made, and your credit is worse than before.

If you are asked to sign a contract, really pay attention to it. Find out what they plan on doing in exchange for what kind of money they are asking for. If they want a one time payment up front, ask why. In these situations it’s all too easy to take your money and never do a thing for you.

Do not pay money for a debt consolidation program. You have the same right o negotiate with your creditors. If you find you can’t pay your bills, either think about declaring bankruptcy or allow your creditors to take you to court to have a judgment made about how much you need to pay. Sometimes this is the best way to go!

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