People enroll to debt settlement companies in the hope to solve their huge debts and be among the debt-free individuals in the country. But the key to this is to find an honest debt settlement company and avoid debt settlement scams. There are lots of companies that offer solutions but you have to find out how to protect yourself from debt settlement fraud.

The most important thing you have to know is that Debt Settlement ad Debt Consolidation is not the same thing. Debt Consolidation is where you put all your debt obligations from multiple accounts into one account which has the lowest interest rate. By doing this, you will make the monthly payments easier by dealing with one payment, one interest rate, and one financial institution to deal with.

Now what is Debt Settlement? Here is how it works.

For example you have three payments to make every month from three different credit card companies. You have to make a $300, $1,500, and $700 monthly payments. When you go to a debt settlement company, the first thing they would do is take a look at your credit report.

They would compute your monthly payments that you have to make which normally includes your payment for the three debts and a monthly service fee for your company. The monthly due is really inviting since it will only be a part of what you need to pay.

Let's say for the amount above, which totals to $2,500 a month, they would ask you to make a payment of $600 per month plus a $50 monthly fee. Of course, it would be a good deal instead of paying the whole amount every month. Once you sign with the settlement company, you will only pay them and you will not deal with the creditors anymore.

Part of the deal was the settlement company will be the one to make a deal for you with the creditors. Most of the time, they would make a deal with the creditors that only 50% or less would be given as full payment.

So what happens to your monthly payments to them? The $600 will go to a trust fund and not to your creditors. It will accumulate over time in a trust fund until the settlement is over. During this time, the creditors will not get anything.

They will begin calling you and asking where you work, why your payment is not in yet, and so on. You may call the settlement company and get them to stop the creditors from calling you. Good luck if you get a call back from them. You have signed an agreement with them and that is it. You will have to wait for the creditors to get the payment from the settlement company.

That is how debt settlement companies work. It is like paying someone over a long period of time to represent you to your creditors. Some people think that this is fine but you can certainly do this on your own.

Go out and make a good deal with your creditors on your own so that it is between you and their company and not through a middleman.

Protect yourself from debt settlement frauds and scams by doing your due diligence and by not joining any program until it is fully researched.

Debt settlement scams and fraud cannot be perpetrated on people with knowlege, education, and a healthy level of skepticism.

Best of luck in solving your debt problems quickly, safely, and easily.