“The 5 dumbest things you can do if you have too much debt,” says the headline. Naturally, I want to know what someone thinks the 5 dumbest things are, so I click. Here is what I see…
1. Paying only the minimum payment on your debt, as this will result in the amount you owe actually growing, and your problems will only become worse.
2. Relying on friends and family, as this can damage relationships with the most important people in your life.
3. Unscrupulous credit counselors that demand cash upfront or high fees for help they promise, but don’t deliver.
4. Using new, high-interest loans to pay off lower interest rate loans. While it may be easier to just have one payment, it will actually increase the amount you have to pay back.
5. Declaring bankruptcy–this can have permanent and severe consequences on your financial future. Avoid it if you can, especially when debt settlement may work for you.
Ok, 1, 3, and 4 I can get behind. I don’t really agree with number 2 in all cases. Sometimes families can be a tremendous help when you fall on hard times. But back the truck up on number 5. “Bankruptcy is the dumbest thing you can do if you have too much debt?” Says who? I scroll to the bottom of the article.
Ah ha, we have an article written by Preferred Financial Services, a Debt Settlement Company that off the top of my head I remember being part of an Attorney General Investigation in New York.
The article from Preferred Financial Services goes on to say such other dumb things like…
1. They will work with their client to determine a reasonable monthly payment the client can afford toward their debt load. This is dumb because most of the time it isn’t true and 100% of the time the creditors do not agree nor receive this “reasonable monthly payment.” Although this article conveniently leaves that part out.
2. The debt settlement companies usually have excellent relationships with creditors. This is dumb because it is also not true. Some creditors actually refuse to work with debt settlement companies and most debt settlement companies do not have much of any relationship with an original creditor.
So if I may humbly add my two cents and make a minor modification to this dumb list. In many cases, if you have too much debt, not only is bankruptcy NOT one of the dumbest things you can do, it can often make much more sense than hiring a debt settlement company. However, don’t expect a debt settlement sales person working for Preferred Financial Services to tell you that because that is not what they are paid for and that seems pretty dumb to me.
So I will take number 5 off their list and replace it with “one of the dumbest things a consumer with too much debt can do is contact Preferred Financial Services for a free, biased, sales pitch about how to resolve their situation.” In fact, let’s go ahead and make that number 1 on the “Dumbest Things You Can Do if You Have Too Much Debt” list.
If you would like to read the article from Preferred Financial Services in all of its “dumbness” you can find it here