Are you seriously writing this BS?
“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
The number 1 worst thing about debt is allowing it to appear. Other 5 points go behind it.
Agreed Nick.
Accumulating debt is the number 1 thing that prevents families from building wealth. It is a trap and a vicious one at that.
I would not advice taking a loan in first place. Earn money and then spend what you have!
I totally agree. it seems Preferred Financial Services are self-serving and so misleading. yes, like you i can get behind those few items. I have been there (in serious debt) , but have worked my way out of it. I paid off my smallest debts, then took that money and added it to what i was paying on the larger ones and have done well like that. you are doing a great service and please please continue.
Hello Manni,
Thanks for sharing your thoughts. Yes, what you did was a simple system called a debt snowball. You will often hear Dave Ramsey talk about it. It is a very effective way to pay off debt provided you have the cash to make more than the minimum payments.
Haha…that’s classic! I’ve heard that declaring bankruptcy is a really dumb thing. I love how everyone has an angle…even doubt settlement companies! Lol
Hello Amelia,
Yes, everyone does have an angle and it seems the advice given to consumers is typically bent the same way 🙂
What is funny is in this industry you will have sales people telling a consumer one thing, and then that sales person will go to a different company, and tell the consumer the complete opposite information because that is what is needed to sell the other program.
I have seen a lot of this recently. Sales people for non attorney model debt settlement companies, would always tell clients that you didn’t need an attorney to do this. Then when the new laws passed banning companies from collecting all their fees upfront, all of these sales people scrambled to go work for attorney models that continued to screw consumers by charging the fees upfront.
Then these same people were now pitching that you always had to have an attorney to settle debt. It is ridiculous.
By the way, the truth is: an attorney can settle your debt, a non attorney can settle your debt, your brother can settle your debt, your kids can settle your debt, even you can settle your own debt.
To ensure that you don’t fall into a debt trap try to live within your means (paycheck) if you are giving your entire paycheck to debt then you are in DEEP trouble. Pay off the smaller ones first and then tackle the bigger ones. Chip away at your debt one bill at a time.
Hmm… I mean debt settlement companies writing this sort of BS are just self promoting. God I hate them!
Hey Matt,
That is one of the problems with the internet 🙂 Anyone can write whatever they want and things can get awfully confusing real fast.
The best thing for a consumer to do, is follow the money. Look at the source of information and if they get paid when you purchase the only thing they are suggesting as a solution, well at minimum you should be suspect of that information.
It doesn’t always make it wrong, but it certainly makes it suspect.
Thanks for sharing your thoughts Matt.
It is a good thing I don’t have a loan, which could lead to debt. I only spend what I need then save whatever I could be able to save. As for number 5, some people declare bankruptcy because it eliminates the legal obligation to pay many of their debts. I just hope they will give some advice on how to avoid financial mistakes.
What a perfect article for a dumb person. I admit that I am a dumb person too but not in terms of financial crisis. I think this is the time you should erase the vocabulary “dumbness” from your mind. Back to five dumbest things, I agree only on number 1, 3, 4 and 5 but totally disagree with number 2. As what you said that sometimes families can be a tremendous help when you fall on hard times. Yes you are right and I think only the family who can help you with this kind of crisis in your life.
Number 2 bothers me, too. Some families are wealthy and don’t mind a one time bailout to help another family member. As far as number 5 about bankruptcies I have friends who have been through bankruptcies and this was a way out and a way to start over. Now, they are happy homeowners again who have learned a good Life Lesson.