In our last post, we talked about various ways to handle burdening payday loan debt. In this entry, we will focus on using debt settlement for payday loans type services.
Using Companies that Offer Debt Settlement for Payday Loans
Many firms offer debt settlement services today for consumers with payday loan debt issues. Whether they are a law firm or not means little. Whether an attorney is on site or not, the concept and approach are the same. The company will approach a lender for a client with an offer of usually around half of what is owed. Should the lender accept, then the client pays the whole settlement figure at one time to the lender to call the debt clear and paid. While a debt settlement direction may be the best option for some consumers in certain situations, it’s hard to imagine if one is in-the-know, that this is the best attack to try and resolve maybe a couple grand worth of payday loan accounts. Why?, Lets look at how a debt settlement plan would resolve payday loan debt in detail.
Fees, Harassment, Credit Damage
First let’s put it right out debt settlement firms are not cheap. Their fees are far away higher than using a credit counseling agency. Then there is compliance. Before a fee can be charged, the law mandates a firm must have a settlement reached , yet many settlement outfits do not adhere to this properly. Attorney models are NOT exempt from this. Remember, you are not paying someone to bring $60,000 worth of credit card debt down to $30k. For payday loans, you end up spending quite a bit to bring say $3000 worth of payday loan debt down to maybe $1500. Not a lot of savings there. The fees alone have to be far under $1500 total to make any sense.
Next comes the harassment. One must STOP completely paying their loans back while they sock away enough money to make the offer for a settlement payoff. Problem is, what happens during the year you are trying to save up and not paying your payday loan? Well, they will call you endlessly. They will also send you to a collection agency, who will now report to the credit bureaus you are seriously delinquent. Not a good thing when the day is done. They may still refuse to settle, instead filing a suit against you.
There is a lot of risk things go badly, yet the rewards are minimal. The credit damage alone isn’t worth trying to shave $1500 off the debt. Oh yeah, don’t forget forgiven debt is reported to the IRS and IS TAXABLE.
Our next blog will focus on Debt Management Programs offered by credit counselors. You will be able to see how much easier and risk free it is to pay these loans down using that method.