Are debt-settlement companies too good to be true?

We’ve all seen the television commercials or heard the radio advertisements about debt-settlement companies and how they can take your hand and mysteriously pull you out of the financial hole you are drowning in. This may seem like a life-saver to those who are desperate, but are they really worth it?

For those who have received letters about a Credit Card Stimulus Act that allows the generous 50 percent deduction of what you owe, beware, this is simply a debt-settlement company looking for business. If you are seeking outside help, contact a reputable agency listed by the National Foundation for Credit Counseling.

According to USA Today, these agencies ask consumers to make a monthly payment into a separate account, which does not go to your lender (whoever supplied the car loan, mortgage or other line of credit) until the amount has reached an amount suitable to present as a settlement. As all companies have a different standard, this might take a long time.

“In the meantime, creditors may file a lawsuit against you and your wages could be garnished,” says the news source. “If you want to try settling with a creditor, you may be better off negotiating on your own instead of paying hefty fees to a third party.”