Beware Of Debt Consolidation Companies

Posted by Layla Vanderbilt

April 6, 2010

Debt consolidation companies are boons to suffering humanity. But all companies are not that helpful. There are companies which are not legitimate. Therefore, there is a need to identify companies that are really serving people as they claim to be. We have to take certain precautions on this matter.

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.

Require A Large Upfront Payment - A commonly used scam in debt consolidation is charge a large fee in advance of hundreds, even thousands of dollars. A few offer to refund such a fee after their customers finish, but in reality people rarely compete these programs. Be aware of this tactic and make sure you don’t end up spending any more then absolutely necessary to put yourself in the best possible financial standing.

Look for a company that offers a flat monthly fee. You can usually find a legitimate non-profit company that can offer a flat monthly fee because they are usually subsidized by financing companies. You can find good for profit companies that will also offer a flat monthly fee with the addition of a competitive fee.

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.

Request Account Numbers First: You must be highly suspicious of any company that asks for your account numbers, social security number, or other personal information before providing a quote. If you give all these details just like that it will lead to identity theft and you will be the looser. Simply providing name of the creditor, balances and rate of interest will be enough to get an accurate quote.

Layla Vanderbilt is the content coordinator for a leading website that offers for instant bad debt consolidation advice and guidance.

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