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Debt Consolidation Scams – Know the Warning Signs

Watch for Debt Consolidation Scams

Millions of Americans are hindered with credit card, auto, home and student loan debt and are looking for debt consolidation services to help alleviate the monthly financial strain that these bills place on them. Debt consolidation is a great way to reduce interest rate payments and consolidate debt. Unfortunately, there are individuals and companies out there looking for ways to take advantage of consumers in financial strain. When you’re looking for a debt consolidation company, look out for these “scam” warning signs.

Huge Fees:

If a debt consolidation company charges a large upfront fee for reviewing your account information and offering a credit situation analysis, you may want to do a little research for consumer complaints and to see if the company is in good standing with the Better Business Bureau. Look into any company asking for upfront fees for educational assistance, as most of this information is available free online. If a company were confident that you would benefit from their services, why would they ask for a fee to educate you? Wouldn’t any education help you realize their services are worth your investment? Reputable companies often charge fees after they are certain that they can help your financial situation.

Promises that seem too good to be true:

No company can guarantee upfront that your monthly payments will be reduced by 50% or that they can reduce your interest rates by 20%. Debt consolidation is a great way to reduce monthly payments, but everyone’s current and past situation is different and a company can’t guarantee something until they do a thorough analysis of your unique situation. If a company guarantees something without looking into your situation, ask them to send you something in writing and check to see if the company has any record of doing what they say they can do.

You get contacted by them:

Most reputable companies avoid spam emails, and many others that send out junk email or cold call your home are looking for an upfront fee that is not tied to results. If a company that does not have a current relationship with you contacts you, be weary of doing business. That said, there are reputable companies that search for new customers, just do a little research before committing to anything and ask to be billed after they’ve given you a valuable service.

When researching to see if a company is reputable, visit their website, search for consumer reviews and check with the Better Business Bureau to see if they’re in good standing. There are great debt consolidation companies, just be sure you choose to give money to a company that can help your situation.

See more:

Beware of Debt Help Scams – http://www.nyc.gov/html/ofe/html/help/beware_debt.shtml

FTC Consumer Information: InDebt? – http://www.ftc.gov/bcp/menus/consumer/credit/debt.shtm

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Debt consolidation is the process of minimizing your creditors and consolidating your debt. After consolidation, you will have less creditors (ideally one) and you should be paying less in interest each month. Your debt will likely become more manageable and easier to payoff, but it's important to remember that every successful consolidation process depends on your ability to live within your means. Thanks for stopping by to learn about consolidation and the different consolidation loans and processes that are available.