Avoid Debt Consolidation Scams
Some debt consolidation companies, sadly, are not legitimate. Some companies exploit consumers in numerous ways with promises of freedom from debt. Educate yourself on the process of consolidating debt and watch for these signs in order to protect yourself from shady operations.
Payments Are Quoted At Unrealistically Low Rates – Companies that consolidate debt work with creditors to reduce interest rates. The lowest attainable rate has already been predetermined by creditors, so the rate any debt consolidation company can get you will be the same. As of 2004, reduced minimum monthly payments are no longer accepted by creditors. If you are quoted an unusually low rate, it’s because some companies inflate their rates once you are in the program . Rather then comparing companies monthly payments, request information about the monthly fees associated with their program.
Beware Of Demands That All Debts Be Included. Another good thing to know is that all loans are not the same. Some loans like student loans may already have a low interest rate. While other loans like credit union loans are not eligible for a lower interest rate. This means that companies that want you to include all your debts do not have your best interest in mind.
When a company wants you to include all of your bills in your monthly payments, usually what they are actually wanting is to charge you a larger handling fee. To keep this from happening make sure that you look through all of your bills and decided ahead of time which bills you would like to be included. Beware Of High Upfront Fees. Turn and run when a company tells you that they charge an upfront fee. Though most will promise you a refund of the fee upon the completion of the program, very few people actually finish the program which means they keep the money.
Flat monthly rates are charged by non profit debt consolidation companies, as these companies are often subsidized by financing companies. Companies taking a profit from debt consolidation services will usually charge a competitive fee along with their flat monthly charge.
Offer Debt Settlement And Other Services: There are companies who promise you to offer other services like debt settlement, credit repair, and other programs. They are all sugar coated venoms. They will only swallow your money and you will face utter disappointment. If you really need to make a debt settlement, you have other valuable option, that is, declaring bankruptcy. This will be a better financial choice, I would say.
Beware Of A Request For Your Account Numbers. If a company requests your Account numbers, Social Security Number, or other personal information in order to provided you with a quote, hang up the phone or walk away. You are making yourself vulnerable to identify theft if you provide them with this information. All you truly need for an accurate quote is your creditors names, balances, and interest rates.