Debt Consolidation Services - 3 Things to Watch Out For With Debt Consolidation Companies
Debt consolidation services can provide
a valuable service by lowering your interest rate
with creditors, enabling you to pay off your unsecured
loans and bills in a short period. However, there
are companies that would rather take your money than
help you. To avoid such scams, watch out for the following.
Low Monthly Payment Claims
While debt consolidation companies can
lower your interest rate which might lower your payments,
they cannot negotiate lower minimum payments. Creditors
no longer accept smaller payments since 2004, not
even for hardship cases.
One trick companies use is to lure customers
in with a low quote, only to jack up the required
payment in a months time. By that time you have already
paid out fees, which arent refundable.
Upfront Fees
Another shady practice is to charge
large upfront fees when a company is claiming non-profit
status. Legitimate companies will either charge a
small monthly fee between $14 to $69, depending on
the number of accounts. The other fee structure is
to charge a reasonable fee for each account handled;
typically for-profit companies use this structure.
If you are being asked to pay thousands,
especially with a cashiers check or money order, look
for another program.
Offering Debt Negotiation Programs
You should also be suspicious of companies
that pressure you to use other programs, such as debt
negotiations. First of all, debt negotiations or settlements
usually will not improve your credit situation. Secondly,
you will be charge high fees for something you can
do on your own. And finally, companies who specialize
in debt consolidation have no incentive to see you
flounder with your finances, unlike those offering
other services.
When you are looking for a debt consolidation
program, ask questions about the program, fees, and
amount of time to repay your bills. Take advantage
of the internet and research several different agencies.
Since debt and bill consolidation varies
with the number of accounts involved, you should expect
a phone consultation before you receive any quotes.
With your quote you should receive detailed answers,
including pay off dates for each account and exact
fees. And if you feel uncomfortable with the agency,
feel free to walk away. A consultation is not a commitment
on your part.
To view our list of recommended debt
consolidation companies online, visit this page: Recommende
d Sources for Debt Consolidation Online.
Carrie Reeder is the owner of ABC
Loan Guide, an informational website about various
types of loans.
