Before you sign up for any debt negotiation services, you need to know all about this. If you think it is the same as some debt management plan or credit counselling, then you are mistaken. The reason you need to take care before going for any such plan is that it can affect your credit rating.

Let us have a look at the claims that these companies usually make. They will promise you that they will negotiate with your creditors and as far as your unsecured bills are concerned, they will get you a discount of somewhere between 10 and 50 per cent.

You will often see them advertising as being an option to bankruptcy. They will also claim that your credit rating will not be affected in any way if you use their services. They will often arrange for you to make payments to them instead of your creditors, under some debt negotiation program.

While they will make many big claims, the truth is somewhat different. Now, you will often see them label themselves to being non-profit. This label alone is not enough to ensure their being legitimate. Besides, no one can guarantee that any lender will accept only a part of a legal debt. The truth is that if you stop your payments to your credit cards, you will actually incur late fees as well as added interest and charges.

Meanwhile, if you happen to go over your limit, then all the additional charges and fees will also come along. If you know enough about credit cards then you will know that all this alone can cause your debt to become two or three times its original size.

In addition to these fees, you will also be required to pay fees to the debt negotiation companies in the name of service charges, signing up charges and finally, a predetermined percentage of any savings that you will allegedly make.

While sometimes creditors do humour such negotiation deals, they are not under any obligation legally to do so. Hence, no one can promise any results from negotiation. On the other hand, you might actually end up doing more harm for your credit rating than doing good.

In fact, if you stop making payments to your lenders, they can even sue you. Hence, it is better to understand the lies of such debt negotiation companies before you bear their consequences.

You should stay miles away from debt negotiation firms that will promise to get rid of your unsecured debts, require you to pay quite a big monthly fee, demand a percentage of any savings you make. Instructing you to stop making payments to your lender, should also be a red signal for you.

If you do want to seek help from any such company then you should at least check it with the Better Business Bureau or with the state Attorney General.