Shocking Facts – What Debt Settlement Companies Don’t Tell You
December 17, 2011 | 
Author If you’re thinking about using a debt consolidation or debt settlement service to help you get out of debt faster and save money on your monthly payments, make sure you do your homework before choosing a company. There are definitely shams and scams out there.
First let me say that debt consolidation is *not* the same as debt settlement/negotiation, which most people don’t realize.
Debt settlement companies charge hundreds of dollars as an initial “admin fee” to set up your account, plus a monthly service fee. The fees vary depending on the company and the amount of your debts.
Such companies take your money every month, but don’t make monthly payments to your creditors! Instead, they put it in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there’s enough in your account to pay a creditor in full.
That can take *years* depending on the amount of debt you have with each creditor. Meanwhile, you can be sued by your creditors and your wages can be garnished! (Or just don’t make payments to your creditors. You’ll end up in the same spot without paying someone to help you get there!)
Settlement companies don’t ask your creditors to stop all interest, late fees and overlimit fees from accruing. That means while the negotiations are ongoing, your bills will continue to grow! So if you’re sued and a judgement is brought against you, you’ll owe more money than before!
And shoddy companies, which there are a lot of, don’t tell you *any* of this up front. I call it “getting permission by omission” because they simply don’t tell you how their program works *before* you sign an agreement with them. Or after, for that matter. But if you ask the right questions, eventually you’ll figure it out. (Or when the crap hits the fan. Whichever comes first.)
Let me give you an example of how debt settlement works.
Let’s say you have $20,000 in unsecured credit card debt. You owe $10,000 to one credit card company, $6,000 to another and $4,000 to a third. You agree to a 5 year plan where you pay $250 a month to the settlement company. (After all, $250 a month for 60 months is only $15,000, so you’re saving $5,000 and you’ll be debt-free in 5 years, right?)
The admin fee will cost you $750. Your first 3 monthly payments go towards that and nothing gets put into your trust account until your 4th month.
The settlement company keeps $50 of your $250 payment each month for the service fee. That means $200 a month is being added to your trust account.
Most debt settlement companies claim to be able to negotiate your debt for about 50% of what you owe. So let’s use the lowest credit card debt as an example.
If you owe $4,000 and your creditor agrees to accept $2,000 as payment in full, it will take 10 months at $200 per month to have enough in your trust account to pay off just that one credit card.
But remember, your first 3 payments to the settlement company only paid the admin fee. That means your first credit card settlement is 14 months *after* you started sending them money.
So what’s the problem? It’s simple. Your creditor won’t agree to accept half of your actual debt unless, or until, it can be paid in full. Otherwise, you’re expected to make your normal monthly payments.
Since you don’t have $2,000 in your trust account, and you won’t have it until more than a year after you stopped paying your creditor directly, they’ll probably take you to court and request that your wages be garnished long before you have that $2,000 built up.
And what about your other creditors? Well, they’ll be waiting even longer to get their money from the settlement company. The $6,000 debt will take 15 *more* months to pay off, assuming your creditor waits that long and agrees to 50%. And that $10,000 bill? You do the math.
On the other hand, if you signed up for a 3 year plan with the settlement company, your debts would be paid off sooner. But, the question is, will your creditors wait that long? Probably not.
The facts are, you can negotiate with your creditors yourself. Most will agree to take a smaller monthly payment from you and stop all interest and fees from accruing. And, of course, you’ll save thousands of dollars in fees to a settlement company.
Before signing up for any service, please be sure you check out the company thoroughly. And don’t let the words “non-profit” fool you either. A lot of debt settlement companies claim to be non-profit.
Going back to the example above, if you pay them $15,000 over a 5 year time frame and they settle your debts at half of what you owed, they’ll make $5,000 from you. I’d call that a profit, especially since they might not have actually helped you in any way.
Most companies will allow you to cancel your account and get a refund of what you’ve paid, less the non-refundable admin fee and the monthly service fees. If you feel you’ve been mislead about their program, don’t hesitate to argue til the cows come home. File a complaint with the Better Business Bureau or hire an attorney if you feel you’re getting nowhere.
You can visit the Better Business Bureau’s website (http://www.bbb.org) and find reports on hundreds of companies. Here’s a small listing of companies that have poor reputations with the BBB:
National Consumer Debt Council LLC – Irvine, CA (A.K.A. NCDC, United Consumer Law Group)
Financial Rescue Services – Burbank, CA
Debt Legal Services – Anaheim, CA
American Debt Relief – Los Angeles, CA (A.K.A. A M Debt, American Debts Relief, Debt Relief)
Please be very cautious when choosing a debt help company and ask lots of questions before agreeing to anything. If you find they’re evading your questions, run fast and run far. There are reputable companies out there, so keep looking until you find one.
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Tags: Companies, Planets, Really, Settlement, Shocking | 
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What Is the Right Lease Agreement Template for Your Property?
Lease agreement is generally a long term rental contract lasting for 5-10 years depending on the mutual terms and conditions between the tenant and the landlord. There are different types of template based on whether the property is residential or commercial.
Although there are many elements that are same for both residential and commercial property, there are few differences that set the two lease agreement apart. It is therefore important to guarantee that right agreement template is selected to protect the interest of the property and avoid any dispute whatsoever in the future.
Commercial lease are often longer compared to a residential lease and will list down several people that may include the landlords, the investors, the tenants and any other person who has a stake in the property. It is also important that all the terms of reference in the lease are clearly spelt so they are less prone to court disputes. Initial investment of time and energy to select the template will reduce the chances of any problem later on. Templates for commercial lease agreement are available online to find the one that is suitable for a given property.
An agreement of residential property is simpler compared to commercial one. It does not involve multiple stakeholders as in the case of commercial property. It is therefore far less prone to dispute as less number of persons involved in it and the terms and conditions have been clearly sorted out initially during the agreement. Templates for residential lease agreement are also available online and one can download these and customize them as per their needs.
So whether it is commercial property or a residential one it is important to find the right kind of lease agreement template. This is to ensure that the property is in right hands and taken care of very well.
How Do Reverse Mortgages Work?
Reverse mortgages are good those retirees who have a great deal of equity in their Real Estate but they need an influx of cash to support their lifestyle. So what actually is a reverse mortgage?
This is a mortgage loan on the equity in your home but in reverse. Your take the cash value out of your home without making mortgage payments while you continue to reside in the residence. Since you don’t make monthly payments, your debt increases. You also do not need to qualify for a reverse mortgage in terms of your income.
There are few qualifications – you generally must be older than 62 and be the owner of the home. The loan will not have to be repaid until:
1. You move out of the home permanently.
2. You sell the residence.
3. You die.
As your debt grows larger, the amount of interest added to the loan increases. So your equity is falling and your debt continues to increase. If your property value is not increasing rapidly, you may consume the equity during your lifetime.
According to the Federal Trade Commission, there are some downsides you should consider prior to signing up. They are:
1. Lenders charge closing costs and all loan fees to create this loan.
2. Lenders may charge you fees to carry the loan.
3. Your total mortgage amount will probably increase in time.
4. Your equity will decrease.
5. Most reverse mortgage loans are given out with variable interest rates. This means the rate can increase based on market conditions.
6. Interest on these mortgages is not tax deductible on income tax until the loan is paid.
7. If you don’t plan to live in the home for an extended period of time, the costs you pay to obtain the loan are just too high.
For more information on this subject, check out the Federal Trade Commission site at http://www.ftc.gov/credit or HUD at http://www.hud.gov.
Low Cost Houses
How do you find low cost houses? Look in the right towns,to begin with. Then you can find the houses you like and make an offer. Where are the right towns?
Altoona, Pennsyvania still had dozens of homes for sale for less than $30,00 as I write this (2005). I just saw one listed for $7,500! This is a cute little town (see the photo on our site), yet still big enough to have everything you need.
Hot Springs, Arkansas has low cost houses. The cheapest right now is $13,500. My wife and I like Alamogordo, New Mexico a lot, and it still has homes under $50,000. Independence, Kansas has homes starting under $10,000!
How To Find Low Cost Houses
You can look up various local newspapers online, and check out the classifieds. This also assures you that it’s a town large enough for a newspaper. If there are at least a dozen houses for sale, you’ll have an idea about home prices there.
You can find real estate agents online, or in local paper classifieds. Call one and ask if there are any low cost houses for sale. If not maybe he’ll know which nearby towns have some.
You can go to http://www.Realtor.com, where you can search any town for homes listed by price, number of bedrooms, and many other criteria. This tool is a lot of fun. Set the criteria to select only homes under fifty thousand or whatever you want, and you’ll quickly see if you’re wasting your time on a town.
Of course, if you don’t see many low cost houses, you still might be able to get one. When we lived in Anaconda, Montana, where we bought our own beautiful house for $17,500, we watched as a house listed for $18,000 eventually sold for $6,000! Towns that have had some economic troubles often have house selling for far under their listed price. The lesson is clear: make low offers to get low cost houses.
Home Buyers – DIY Home Inspection – You May Not Need a Hired Inspection – Save Money
By doing your own Home Inspection you will know your new home better. You will better understand the working components of the home, by testing the appliances, following the instructions on running and testing the Furnace and Air Conditioner, Water Heater, etc. these instructions are included in Good DIY Inspection Reports.
When purchasing a DIY Home Inspection Checklist, make sure it is more than a simple fill in the blank checklist (without “how to” instruction.) Most reports on the market do not have instruction to guide you through a home inspection. A DIY Inspection Report should give you detailed instruction on how to perform an inspection on any of the many components one will find in a home.
You will find most hired Home Inspectors have many disclaimers built into their pre-inspection agreement and their report. If an issue is found with their inspection, they will want you to get a professional to look at it for their opinion, to eliminate the inspector’s liability. If you were performing your own home inspection, and you found something it is suggested to talk to your Realtor and/or the homeowner. If their answers do not set quite right with you, you could call a professional to look at the problem, just as the hired inspector would do. Or elect not to make an offer on the house.
Things to remember when doing your own inspection:
oIt is a visual inspection only. If there is a need to see behind something, the homeowner should be asked to make the area accessible for further inspection. Respect for the home owner’s property (home and contents), should be top priority.
oAfter testing the furnace and/or air conditioning reset the thermostat to where it was.
oElectrical breakers should not be tripped. With the electronics and computers being used, tripped breakers may cause major problems.
oWhen testing GFCI receptacles make sure they are all reset after testing. Freezers in garages are commonly using a GFCI receptacle.
oLeave the home exactly as you found it.
Property Management – Pros & Cons
What do property management companies do, anyway? What don’t they do? How much do they charge? Are they worth it?
Whoa there, tiger. We’ll answer your questions about property management, and succinctly, at that.
Landlords and rental building owners hire property management companies to assume all of the headaches involved with managing properties and tenants, allowing the landlord to spend their time in other ways. Typical responsibilities of a property management company include screening tenants, fielding phone calls from them, taking care of all repairs and maintenance, complying with rental laws (such as lead paint tests and disclosures), signing rental agreements and rental disclosures, etc. As an added bonus, they keep track of all the money that’s spent on each property, making your accounting a LOT easier. In a word, they do the everyday management.
What they usually DON’T do is pay your bills, such as your mortgage payment or property taxes (word to the wise: have your mortgage lender escrow for property taxes & insurance, ground rents, and any other recurring bills to save time). Property management firms typically don’t register your rental properties with local municipalities, either.
What do they charge? Property management companies generally charge in the 7-10% range, as a commission of all rental income collected (e.g. if the rent is $1,000, the management fee may be $70-100). This is no small fee every month, and constitutes a major disadvantage to using a management firm, especially when so many landlords only break even or have a small cash flow from their rental properties.
So now the hard part: are property management companies worth the expense?
The answer, of course, is that it depends. You may not be able to afford to pay a management company, if your rental only breaks even each month. But there is something to be said for being able to sleep at night without being woken up by obnoxious tenants calling to complain that the smoke detector needs a new battery, or having to spend your lunch break running out to show a rental property. The fact is that most landlords can handle the management of a few rental properties, but there is a critical mass at which point it no longer becomes feasible to perform property management duties for your rental properties AND do all of your other business tasks.
So my recommendation is to handle management yourself for your first few rental units, and get a crash course on managing rental properties. But when you can’t take it anymore, it’s time to pass the buck along to someone else, and get back to your primary business: making money.
Accountants Cannot Be Unpaid Agents Of Authorities
Apart from the financial and accounting services that accountants provide, many people are oblivious to the fact that accountants are just serving a host of government departments with the work that they render. Tax, statistics and labor related issues are areas where accountants are compelled to comply.
It is believed that governments would collapse if accountants in practice were to stop submitting all the taxes on behalf of their business and individual clients. Hence, tax and legal subjects are compulsory for any accounting student.
Like all sectors of the economy, accountants play a vital role in developing society, and their services to their respective countries should be acknowledged. Their skills enable states and countries to prosper.
The statistics generated in tax forms, labor etc. is an important barometer of economic and employment growth. Accountants contribute to the formalization of businesses that would otherwise have been outside of the system. Their assistance, ensures that more businesses are established, bringing in more tax revenues for governments.
Where do we draw the line? Are accountants obliged to co-operate in every arena?
The accountant carries a huge responsibility in complying with the law at all times.
The laws of democratic dispensations, however, entitle the accountant to privacy.
Accountants are NOT at liberty to divulge certain information that is regarded as confidential. In their haste to appease authorities, they loose sight of the importance of accountant-client privilege.
Authorities, in western countries, as well as other democracies, are passing numerous laws that effectively “coerce” accountants and financial advisors to report irregularities and “suspect” transactions in tax, share dealing and financial instrument trading. After Enron and World Com, authorities are keeping a close eye on financial advisors. These regulations are welcomed, but places advisors in a precarious position.
Honest mistakes can me misconstrued, as serious transgressions. Accountants lack the capacity to scrutinize every transaction in their client’s books. The hosts of laws being passed in many countries are turning advisors into bloodhounds, when they should be “watch dogs”.
A fine balance should be struck between the requirements of the law and the needs of business owners. Clients pay for the services, after all, and their opinion matters most. Of course, unethical or illegal behavior can never be countenanced.
It is advisable that recourse should be sought in those laws that demand court orders or search warrants before information is obtained illegally by authorities. Many “demands” circumvent basic, common law principles.
Accountants should act like attorneys, and defend their client’s interests, first and foremost.
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Understanding The Annual Percentage Rate (APR) And What It Really Means In Real Estate
The annual percentage rate (APR) gives you the yearly cost of a mortgage in the form of a percentage. The rate calculations include interest, mortgage insurance, and the origination fee (points).
The APR has two main purposes.
1. it allows borrowers to compare loan programs from different lenders so they can see which program is the cheapest.
2. It creates a “level playing field” for lenders. And, three, it prevents lenders from advertising teaser rates and hiding fees from consumers.
The Federal Truth in Lending law requires mortgage companies to disclose the APR when they advertise their rates. Typically the APR is found next to the rate; for example, “30 year fixed…8%…1 point…8.107% APR.”
APRs can be useful for consumers in determining the cost of a mortgage; however, they do have one problem you need to be aware of, and that problem is that APRs can be very confusing because different lenders calculate APRs differently! This means that a loan with a lower APR may not actually have a better rate.
To find out the truth about a particular APR on a loan, you have to do digging and calculations on your own.
The first step is to ask lenders for a good-faith estimate of their costs on the same type of loan (e.g. 30-year fixed) at the same interest rate.
Once you have the estimate, the second step is to delete all fees that are independent of the loan (e.g., homeowners insurance, title fees, escrow fees, attorney fees, etc.
The third step is to add up all the loan fees and then choose the lender with the lowest loan fees.
You may wonder why there’s so much confusion about APRs. Well, there are several reasons
Reason 1:
The rules to calculate APR are not clearly defined.
APR is calculated using a complex formula prescribed by the Consumer Credit Act (1980). But, there are three different ways of calculating the Annual Percentage Rate! Lenders must inform you of the APR calculation method before you sign a loan agreement, but that doesn’t mean it’s easy to understand.
Reason 2:
It’s not always clear what fees are included in the APR.
The following information about fees will show you what I mean.
A. Fees generally included in the APR are:
1. Points – both discount points and origination points a. Pre-paid interest. Note: This is the interest paid from the date the loan closes to the end of the month. Most mortgage companies assume 15 days of interest in their calculations. However, some will use any number between 1 and 30.
2. Loan-processing fee
3. Underwriting fee
4. Document-preparation fee
5. Private mortgage insurance
B. Fees sometimes included in the APR:
1. Loan-application fee
2. Credit life insurance (insurance which pays off the mortgage in the event of a borrower’s death).
C. Fees not normally included in the APR:
1. Title or abstract fee
2. Escrow fee
3. Attorney fee
4. Notary fee
5. Document preparation (charged by the closing agent)
6. Home-inspection fees
7. Recording fee
8. Transfer taxes
9. Credit report
10. Appraisal fee
Reason 3:
The APR doesn’t tell you how long your rate is locked in for. This means that one lender who offers you a 10-day rate lock may actually have a lower APR than a lender who offers you a 60-day rate lock.
Reason 4:
APR calculations for adjustable and balloon rates are complex.
The future rates for adjustable and balloon rates are unknown, so calculating APRs becomes very complex. This results in more confusion for borrowers.
Reason 5:
Comparing APRs of different loans creates false comparisons.
Consumers sometimes make the mistake of comparing the rates of different loans; i.e., comparing 30-year loans with 15-year loans using the respective APRs.
Example: A 15-year loan may advertise a lower interest rate, but have a higher APR because the loan fees are amortized over a shorter period of time. So, don’t ever compare the two!
Reason 6:
Different lender computer software programs may calculate different APRs Lenders often use computer software programs to calculate their APRs and don’t even know what baselines are used in these programs. Worse, the same lender with the same fees may use two different software programs. It’s entirely possible that these programs may calculate two different APRs!
Here are my two recommendations in regard to the APR:
First, use the annual percentage rate only as a starting point when dealing with lenders.
Second, as I mentioned earlier, get good-faith estimates from lenders and then exclude any costs that are independent of the loan.
Key Point: When it comes to APRs, do your homework!
Jack Sternberg
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Private Investors and Due Diligence
It should come as no surprise that any private funding source that you work with is going to want to complete an extensive amount of due diligence as it relates to your business. Foremost, you are going to need to have a professionally completed business plan that carefully and clearly showcases your business to a third party. In many instances, you may be required to include several risk disclosures that relate to your business. You should always have an attorney review your business plan to make sure that the document is not viewed as a securities sales documents. The laws that relate to investment into small businesses vary from state to state.
After you have completed your business plan and have located your private investor, it is time for the due diligence period. In some instances, you may be required to provide a business valuation as it relates to your operation. This is especially true if you are a business that is already in operation since you are going to need to negotiate a specific percentage to sell to a third party. Only a certified public accountant or an expert within your industry will be able to complete a formal business valuation on your behalf.
One of the things that you should be aware of during this period is how much control your angel investor or private funding source is going to want over your business. As much as they are reviewing your business, you should review the objectives of the individual investor. This is especially important if you are looking more for a silent partner rather than someone that is going to take an active role in the day to day management of your business. In many instances, your private investor will have a significant amount of industry experience as it relates to your specific venture. As such, while this individual may act as a silent partner they may also be able to act as a mentor for your business. As such, you should take this into account when you are planning on working with a third party funding source.
In closing, working with a private investor can be extremely beneficial for you and your business. However, you should make sure that you actually need private investment capital in order to launch or expand your operations. You may be able to use many alternative methods of financing that do not require the same issues that arise from working with an angel investor.
Writing An Offer To Purchase Real Estate
Just found the home of your dreams and want to purchase it? It’s time then to write an offer to purchase a real estate property. The process needs careful study, research and should not be made in a rush. Remember that your purchase offer is critical in negotiating a sales contract with the seller.
The purchase offer is a very important legal document that details the price you are going to pay for the property as well as several terms and conditions such as the mode of payment — if it’s going to be cash or financed by a lender, the down payment, the inspections to be conducted, timeframe, what personal property will be included, the closing costs and who will pay for them, terms of cancellation, any repairs you want done, the date of closing and possessing the property and other contingencies.
In writing the offer, your aim is to get what you want but it’s also best if you put yourself in the shoes of the seller. Anticipating the seller’s reactions will give you a better perspective in deciding what conditions to consider in your offer. Be sure that you use the proper form as each state has its own laws on real estate.
One of the most important considerations in writing the offer is your purchase price. Be specific and realistic about your price. If you know that there are multiple offers, consider offering a higher price or making a big down payment to get the seller’s nod.
Making a reasonable initial deposit or down payment is also vital in a purchase offer. You can pay in cash, personal check, cashier’s check or by using a personal property, real property, mortgage or promissory notes. Specify the person who will keep the deposit. Normally, it’s a third party like the seller’s attorney or the buyer’s agent.
Include your financing terms if it’s FHA, VA, conventional, contract of sale or assumption of mortgage. You may also include the maximum interest rate if you wish.
Contingencies are essential as well since these serve as your protection should the deal fails to push through. These written clauses will allow you to cancel the contract without penalty in case something goes wrong during the negotiation. Common contingencies include obtaining financing, property appraisals and inspections done by professionals to ensure that they pass your standards and that the property you are buying is in good condition.
Be specific about dates and timeframes. The expiration date of the offer should be stipulated and the seller should be given enough time to respond to the offer. Both the buyer and the seller have to agree on the closing date. For more information on purchase offer expiration, check your state contract laws.
The date of possession of property by the buyer should be clearly stated to avoid confusion and other problems. Will it be on the day of closing or a day after or two to three days after closing? The buyer and the seller have to agree on the date of occupancy. But normally, a seller is given up to three days to move out of the house and turn over the keys and possession to the new owner.
Stipulate in your purchase offer as to who will pay the necessary fees like title, escrow, county or city transfer taxes and closing costs. These fees may be shouldered by the seller or the buyer or split by both. If you’re not sure about the custom in your area, consult a real estate agent or lawyer before you write this portion.