6 Ways to Lower Your Debt Without Getting Ripped Off

Many debt settlement companies engage in fraudulent, deceptive, and abusive practices. Here are safer ways to deal with your debt.

Clearly, some debt settlement companies engage in fraudulent, deceptive, and abusive practices that pose a risk to consumers, according to a federal investigation of the industry. In its investigation, the U.S. Government Accountability Office found that some debt settlement companies provided fraudulent, deceptive, or questionable information to its consumers, such as claiming unusually high success rates for their programs – as high as 100 percent. However, the Federal Trade Commission and state investigations have typically found that less than 10 percent of consumers successfully complete these programs.

According to the Federal Trade Commission, if a company promises to erase your debt for pennies on the dollar, be skeptical. Debt negotiation can be risky, and it can have serious, long-term consequences for your credit report and your ability to get credit in the future. And if another company promises to repair your credit, alarm bells should go off. The truth is that no one can remove accurate negative information from your credit report because it's illegal to do so, the FTC says.

While it may feel like desperate times call for desperate measures, never turn your finances over to anyone – especially not a con-artist or fraudulent company. Here are six tips from the Consumer Federation of America on how to get real debt relief:

1. Try to resolve your debt problems with your creditors directly. You may be able to get your interest rate lowered, late charges forgiven, and your monthly payments reduced.

2. Contact a nonprofit credit counseling service for advice. It may be possible to work out a plan through the credit counseling service to pay off the debts over time. To find the nearest nonprofit credit counseling services, consumers can contact the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies

3. Know your rights. Ask your Attorney General’s Office if state law limits the amount or timing of debt settlement fees in your state. Find your state AG at

4. Read the fine print. Walk away if the contract doesn’t contain the promises that were made to you, or if the contract contradicts what you were told.

5. Look for services that charge a fee only after the service actually settles your debts. Steer clear of debt settlement services that charge you fees whether or not your debts are ever eliminated.

6. Take immediate action if you can’t make your mortgage or car payments. (Debt settlement services don’t usually address mortgage or car debt.) Contact your lender or mortgage servicer immediately to try to work out new payment arrangements.

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