DIY Debt Settlement Myth #1: A Settlement Company Will Get Better Deals Than I Can Myself
This is the first in a series of posts discussing the most common myths about do-it-yourself debt settlement. As you do your research online, you’ll read a lot of pages and articles that are slanted against the do-it-yourself approach and biased in favor of using third-party debt companies. Many articles that have titles pertaining to DIY settlement are really just bait-and-switch marketing for a company program. The article may start out with the question, “Is it possible to settle debts on your own?” Then it provides a “yes-but” answer, as in, “Yes, but you’ll get better results if you use a professional.” From there we are usually treated to a repetition of one or more tired old myths about DIY vs. traditional debt settlement I will cover in this series.
I can understand why people might think this claim to be true. After all, there are many situations where it makes good sense to hire a professional instead of doing the job yourself. Rewiring your house if you’re not a qualified electrician would be one example! However, when we’re talking about negotiating down your credit card debt, the only thing you really should care about is how much money you have to pay out in the end. Success is measured by how much money you SAVE, period. So by definition we have to take into account the sky-high fees charged by these debt companies, with 25% of savings considered a current industry benchmark.
With do-it-yourself debt settlement, you have an opportunity to save more because you’re excluding fees that amount to a significant chunk of your debt. Please note that when I refer to DIY debt settlement, I’m not just talking about buying a book from amazon.com, but rather hiring a DEBT COACH to guide you through the process. I’ve been doing this for consumers since I set up ZipDebt in 2004, and the results have been nothing short of amazing. In 2011 alone, ZipDebt clients settled $8.5 million for an average of 32.2% (balances at time of settlement). The prior year we had more than $16 million in reported settlements at 33.1%. Bear in mind that 100% of these settlements were SELF-NEGOTIATED by the consumer using ZipDebt’s training materials, supplemented by live coaching. Now, good luck finding a published track record by a third-party debt settlement firm that comes anywhere close to our results. Settlement averages for most of the larger firms, when you can find any data at all, come in around 47-50% before fees.
Let’s say you start with $50,000 of debt, which can be expected to inflate during your program to around $55,000 due to interest and fees. Your debt company accepts settlements for an average of 47% of your $55,000 balance, so in this example you pay $25,850 to your creditors. However, the settlement company’s fee is 25% of what they have saved you (measured against the starting balances). So $50,000 minus $25,850 means they saved you $24,150, and 25% of that figure is your fee, or $6,038. Therefore the total amount you will have to pay is $31,888! Your overall savings is only $18,112. While this is a significant amount of money, this is a poor result compared to what you can save by doing it yourself with the aid of ZipDebt.
Let’s compare the above outcome to the results that many clients have achieved using ZipDebt’s approach. Taking that same starting figure of $50,000 and inflating to $55,000 (so we have apples to apples), and using OUR program’s historic settlement average of 33%, you would wind up paying only $18,150 to your creditors, a big improvement over $25,850. Assuming you ordered my Premium Program at $792 (including shipping), your total payout INCLUDING FEES is only $18,942 on a $55,000 debt! That is an amazing total savings of $31,058 compared to a savings of only $18,112 for a professional service. That’s almost $13,000 back in your pocket you would otherwise have paid to creditors and the settlement company. Even more important, when you have less to pay back to the creditor and lower fees you can build money up faster to make settlements. Fast settlements are to your advantage, as I will explain later in this series. This is a huge advantage and translates to LESS RISK of legal action.
Once you understand the power of the DIY-with-Coach method of debt settlement pioneered by ZipDebt, the decision is a no-brainer!
Myth busted. Consumers who are properly coached get better results negotiating on their own vs. hiring a professional negotiator. ZipDebt’s published data proves this beyond any doubt.