You’ve probably seen the ads where companies promise easy solutions to your debt. But do they help or hurt?

Bruce Hagan is a Certified Financial Planner in Tallahassee.
He says some debt negotiating companies can help. But one also must me wary. First rule of thumb, he says, if it’s too good to be true, it probably is.

“Debt Consolidation companies lead you to believe, somehow they wave a wand and part of the debt goes away or magically the interest rate that you’re paying is dropped so that you’re interest rate payments are lower. You know, there is no easy solution.”

No easy solution because no matter what you do, you still have to pay that debt off. At least most of it.
So what do you do?
Hagan firsts suggests to try it yourself
Talk to your lendors. Explain them your situation.

“Contact the people that you owe money and see if there’s some way that you can work out some sort of debt relief,” Hagan said.

“Be proactive. Talk with your lenders. Don’t just not make payments, and just shut them off because then you’re just going to exasperate the problem.”

Hagan also says there may be some situations one can go back to a retail merchant, credit card company or private lone lenders to negotiate the possibility of lowering the amount of money you owe.

“Explain to the lender, my income is this, here are my monthly expenses, as you can see I don’t have a lot of disgresionary spending going on, I’m a single mother, I have two children I have to care for, I do want to honor the obligation, is there any way we could talk about some relief of that debt?” Hagan said.

Hagan says, in a bad economy, more and more lendors are willing to talk.

“They *want* to talk to you. They do want to try to help you pay them back their money.”

If that doesn’t work, Hagan suggests the next step should be non-profit organizations.

“I think that if you can go to some sort of community legal aid or a church is sponsoring a debt symposium or some sort of a forum where you can go and listen where there are going to have volunteer counselors that can sit down and help you with your bills and kind of give you some ideas of where to go. I think that’s a great idea,” Hagan said.

Hagan says for-profit debt negotiators should be used as a last resort.
But if you feel you have to, you should always do your homework.

The Federal Trade Commission offers advice on their website when picking credit counseling services.

Ask what services they offer, if they’ll help you develop a plan to avoid future problems? Counselor qualifications. Where they got their accredidation from? Training? What do they do to keep your personal information secure? Most importantly, how are employees paid?

“And what’s really important for a lot of people to understand is that debt is not the problem itself as much as it is the symptom of the underlying problem, which is overspending and undersaving,” Hagan said.

And the best advice to avoid future debt problems? If you don’t have the money, don’t buy it.

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