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If you're thinking about using a debt consolidation or debtsettlement service to help you get out of debt faster andsave money on your monthly payments, make sure you do yourhomework before choosing a company. There are definitelyshams and scams out there.First let me say that debt consolidation is *not* the sameas debt settlement/negotiation, which most people don'trealize.Debt settlement companies charge hundreds of dollars as aninitial "admin fee" to set up your account, plus a monthlyservice fee. The fees vary depending on the company and theamount of your debts.Such companies take your money every month, but don't makemonthly payments to your creditors! Instead, they put it ina trust account, negotiate your debts with your creditors,then make a lump-sum payment when there's enough in youraccount to pay a creditor in full.That can take *years* depending on the amount of debt youhave with each creditor. Meanwhile, you can be sued by yourcreditors and your wages can be garnished! (Or just don'tmake payments to your creditors. You'll end up in the samespot without paying someone to help you get there!)Settlement companies don't ask your creditors to stop allinterest, late fees and overlimit fees from accruing. Thatmeans while the negotiations are ongoing, your bills willcontinue to grow! So if you're sued and a judgement isbrought against you, you'll owe more money than before!And shoddy companies, which there are alot of, don't tellyou *any* of this up front. I call it "getting permissionby ommission" because they simply don't tell you how theirprogram works *before* you sign an agreement with them. Orafter, for that matter. But if you ask the right questions,eventually you'll figure it out. (Or when the crap hits thefan. Whichever comes first.)Let me give you an example of how debt settlement works.Let's say you have $20,000 in unsecured credit card debt.You owe $10,000 to one credit card company, $6,000 toanother and $4,000 to a third. You agree to a 5 year planwhere you pay $250 a month to the settlement company.(After all, $250 a month for 60 months is only $15,000, soyou're saving $5,000 and you'll be debt-free in 5 years,right?)The admin fee will cost you $750. Your first 3 monthlypayments go towards that and nothing gets put into yourtrust account until your 4th month.The settlement company keeps $50 of your $250 payment eachmonth for the service fee. That means $200 a month is beingadded to your trust account.Most debt settlement companies claim to be able tonegotiate your debt for about 50% of what you owe. So let'suse the lowest credit card debt as an example.If you owe $4,000 and your creditor agrees to accept $2,000as payment in full, it will take 10 months at $200 permonth to have enough in your trust account to pay off justthat one credit card.But remember, your first 3 payments to the settlementcompany only paid the admin fee. That means your firstcredit card settlement is 14 months *after* you startedsending them money.So what's the problem? It's simple. Your creditor won'tagree to accept half of your actual debt unless, or until,it can be paid in full. Otherwise, you're expected to makeyour normal monthly payments.Since you don't have $2,000 in your trust account, and youwon't have it until more than a year after you stoppedpaying your creditor directly, they'll probably take you tocourt and request that your wages be garnished long beforeyou have that $2,000 built up.And what about your other creditors? Well, they'll bewaiting even longer to get their money from the settlementcompany. The $6,000 debt will take 15 *more* months to payoff, assuming your creditor waits that long and agrees to50%. And that $10,000 bill? You do the math.On the other hand, if you signed up for a 3 year plan withthe settlement company, your debts would be paid offsooner. But, the question is, will your creditors wait thatlong? Probably not.The facts are, you can negotiate with your creditorsyourself. Most will agree to take a smaller monthly paymentfrom you and stop all interest and fees from accruing. And,of course, you'll save thousands of dollars in fees to asettlement company.Before signing up for any service, please be sure you checkout the company thoroughly. And don't let the words"non-profit" fool you either. Alot of debt settlementcompanies claim to be non-profit.Going back to the example above, if you pay them $15,000over a 5 year time frame and they settle your debts at halfof what you owed, they'll make $5,000 from you. I'd callthat a profit, especially since they might not haveactually helped you in any way.Most companies will allow you to cancel your account andget a refund of what you've paid, less the non-refundableadmin fee and the monthly service fees. If you feel you'vebeen mislead about their program, don't hesitate to arguetil the cows come home. File a complaint with the BetterBusiness Bureau or hire an attorney if you feel you'regetting nowhere.You can visit the Better Business Bureau's website(http://www.bbb.org) and find reports on hundreds ofcompanies. Here's a small listing of companies that havepoor reputations with the BBB:National Consumer Debt Council LLC - Irvine, CA (A.K.A.NCDC, United Consumer Law Group)Financial Rescue Services - Burbank, CADebt Legal Services - Anaheim, CAAmerican Debt Relief - Los Angeles, CA (A.K.A. A M Debt,American Debts Relief, Debt Relief)Please be very cautious when choosing a debt help companyand ask lots of questions before agreeing to anything. Ifyou find they're evading your questions, run fast and runfar. There are reputable companies out there, so keeplooking until you find one. Article Tags: Debt Settlement Companies, Debt Settlement, Settlement Companies, Trust Account, Credit Card