How To Avoid A Debt Consolidation Scam
It is the most sensible thing to do if you consider taking on a debt consolidation loan to get rid of your multiple debts when you find that things are slowly but surely getting out of your hand. This is because:
- These loans will reduce the number of your debts rolling it all into one.
- You will need less focus and tracking and pay only one bill each month.
- Moreover, since the rate of interest will be much lower depending on the type of loan you take out, secured or unsecured you will need to pay much lower amount each month.
- You will attain a debt free situation very quickly
However, you will be deprived from enjoying all these benefits if you do not plan everything in a strategic and immaculate manner, stick to the plan and make some changes in your lifestyle and spending habits. Even if you follow all these diligently, you may still not achieve your desired goal if you fall for a debt consolidation scam. (Image Credit: Pixabay)
Many consumers frantically looking for desperate measure to end up their debts often find them in a debt consolidation scam. These companies take the advantage of the dire financial positions of these consumers and make the most profit out of it. These companies work for their interest and benefits hardly caring for what you get or lose in the process.
Choosing the right company
Consolidating debt is the most viable way to improve your financial situation and manage your debt more easily to pay off what you owe quickly. However, it can be overwhelming if you do not know where to turn if you consider taking assistance for resolving your financial situation. As the debt consolidation industry has many different companies within it, choosing the right type of company if therefore essential to prevent you from falling prey to these unscrupulous companies.
Here are a few factors to consider avoiding yourself from falling into debt consolidation scams. Debt consolidation can help you to organize your finances but you must spot a viable company to get this valuable service. Choosing the right debt consolidating company is the first step to getting out of debt. It will be a lot easier for you to choose the right and most professional debt consolidation company if you know the features and factors to look for.
- Accreditation: All legitimate companies such National Foundation for Credit Counseling or NFCC will be accredited by and affiliated with consumer watchdogs such as Better Business Bureau and Dun & Bradstreet.
- Reviews: You must check different websites and read the company’s as well as their debt settlement reviews to make a choice. You may also ask your family and friends whether they are familiar with such businesses. Apart from that, you can ask your accountant and consult with a financial advisor for useful feedback. Choose a company that has the maximum positive reviews as positive feedback and satisfied customers are marks of a reliable company.
- Professional: A good debt consolidation company will be highly professional, committed and responsive. When you ask for any information they must be prompt to respond and be confident enough to provide informative and knowledgeable answers to the questions. They will not be keen on forcing a ‘one size fits all financial solution’ on you.
- Fees: A reliable company will not ask for any fees upfront. In fact, the one and only time they will ask for fees is when they have your debts settled or provide satisfactory service to you.
- Contract: A scam company will never ever agree to provide any guarantee in writing and will not even provide any written contract. A good company on the other hand will have a well-designed and formulated service contract with all terms and conditions, fees and services provided clearly mentioned in it. Carefully review the contract and understand all the clauses in it and their significance before signing. If anything is unclear ask for an explanation from the company representative who should be happy and obliged to help you out.
Lastly, look at the privacy and security policy followed by the company. A viable and reliable debt relief company will strictly adhere to a privacy and security policy to ensure that your sensitive and confidential financial information is not leaked out or sold!
Scams can hurt you
If you hurry in making your choice and taking any decision you will end up working with a scam debt relief company. This will hurt you and your financial condition in many ways.
- They will damage your credit score and cost you quite a bit of money.
- They may even vanish in thin air like ether after taking your money.
- They will fail to keep up to their promises as these will be too tall and often too good to be true.
However and at all costs, they will still take your money as well as their charges right at the very beginning and not pay your creditors a single penny therefore taking away your sleep and damaging your credit even further.
Debt consolidation tips
Assuming that you have found the right debt consolidation company for your purpose, there are few tips to follow to make sure that you attain the desired results.
- First, there are a few specific loans to avoid while sifting through different debt consolidation options. Do not include the loans that you do not need to. Unnecessary debt consolidation will not reduce but will actually compound your debt problems. Therefore, leave those loans that have very small amount to repay and you can afford to pay it off through your own resources.
- Second, leave those loans that carry very low rate of interest. Ideally, when you include these loans you will see that the effective interest rate is much higher than the individual rate of interest of these loans.
Therefore, always consider the final rate of interest that you will pay when you consider consolidating your debts so that you do not end up paying up more in either ways. You may consider using a debt consolidation calculator for this.