How to Avoid Being a Debt Consolidation Scam Victim

by Harold Throope

Debt consolidation is one of the largest growing industries in the nation. The economy is difficult. People are losing their jobs and their homes. The cost of living is increasing. And this means that some people are finding themselves in the difficult position of not being able to pay their bills. Debt consolidation can often be the answer for many people. But you still need to be wary. As the debt consolidation industry has grown, so have the number of scams.

If you are one of the many people today who are in the situation of having too much debt and are looking for help, debt consolidation could be a good option. Youll need to do a little research to ensure that you dont get pulled into a scam.

As you are investigating your options, you will be looking for quotes. The very first thing you need to do is keep your private information private. If you are getting a quote from a debt consolidator, the only information you need to provide them with is the list of your creditors, the balances you have with them, and the interest rates you are being charged. You do not have to provide them with your social security number, account numbers, or other private information at this time. By giving them this information you are opening yourself to the nightmare of identity theft. Once youve signed on the dotted line, you will need to provide this information, but for the purposes of the quote, it is not necessary. As for the quote itself, you should not be asked to pay for the quote. If the company is looking to charge you at this point, move along.

Debt consolidation programs tend to get similar deals from creditors. If you are offered a lower monthly payment from one company over another, you are most likely being charged a higher interest rate. This will wind up costing more over the long term. You should also look to see what fees you are being charged. Is there a fee built into your monthly payment? Is there an upfront fee? Are there hidden fees which will be incurred long after youve signed the contract? Make yourself aware of the terms of the contract, including any cancellation fees. Look to see how fees are refunded to you in the event you wish to cancel your contract. You also want to be aware of the settlement guarantee, it should be specified, in writing, what percentage of the settlement is guaranteed.

Often, when you call a debt consolidator they will try to sign you up immediately. Many companies offer their employees financial incentives based on the number of new accounts they sign up. Remember, the person on the other end of the phone does not necessarily have your best interests at heart. Evaluate your options before making any decisions. No matter how dire your financial situation may be, it is important to make a logical decision based on research, not emotion or fear.

After youve gotten quotes and reviewed contracts, it is imperative that you research the companies you are considering. Contact your states Attorney Generals Office. Check with the Federal Trade Commission. These agencies can provide you with useful information. Check the Better Business Bureau to see what types of complaints, and how many, have been filed against your list of companies. If the company is not reputable, you are very likely to be able to make that determination from these three sources, but it certainly doesnt hurt to take the additional step of doing an internet search. Enter the name of the company you are researching into the search engine of your choice. This will give you an idea of how the general public feels about each company.

Just remember to take a deep breath and step back from the situation. Evaluate things as if you were doing it for a friend of yours. If you jump at the first high pressure sales pitch you are offered, you may very well wind up in a worse situation than you started. Read through everything carefully before signing, and if things are too confusing, seek the advice of a financial expert, someone not affiliated with the debt consolidation industry.

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