Debt Elimination Program Pitfalls

Debt elimination programs promise to wipe away your debts. Some of them are legitimate, but the debt elimination industry is notorious for scams. Before you sign up with anybody, learn the common pitfalls of debt elimination programs.

Getting rid of debt makes sense, and there are a few ways you can do it yourself. For a basic overview, see Debt Elimination Basics.

Cost

Nothing is free. To hire a debt elimination company, you’ll have to pay a fee. If it’s a legitimate operation and you don’t have the time to do things yourself, it may be worth the cost. However, you’re paying for something you can probably do yourself.

Scams

Some debt elimination programs are not worth the money - no matter how little they cost. You could end up with a shady operation that ruins your credit and involves you in illegal activity. You’ll lose the money you paid them, you’ll have legal consequences, and your credit may suffer worse than it would have if you did nothing.

• What is Credit?

Keep an eye out for anything that sounds too good to be true, because it probably is.

Band Aid or a Cure?

Using a debt elimination program may help you fix a problem today. However, you may run into the same problem later if you don’t change your behavior, understand your finances, and learn about the consequences of spending.

A debt elimination program may be a short-term fix that allows you to create more long term pain. If you do the difficult work of budgeting, controlling spending, and making sacrifices, you’ll come out way ahead of where any debt elimination program leaves you.

See About.com’s Financial Planning pages for ideas on how to take control of your finances for the long term.