How to Avoid Debt Consolidation Scams PDF Print E-mail
Written by Harold Throope   
Sunday, 15 March 2009 10:46
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.
by HaroldThroope


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 find yourself in the position of having too much debt and debt consolidation sounds like it might be right for you, there are several steps you need to take to avoid being caught in a debt scam.

The first step in getting a debt consolidation loan is getting quotes from various companies. Quotes should be free. If a company is looking to charge you a fee at this stage, move on. Also, when you are getting a quote, the only information you need to provide the company with is a list of your creditors, the interest rates you are being charged, and your outstanding balances. No company should ask you for your social security number or any account numbers or other private information. If you are being asked for this information to provide a quote, you should end the call and cross that company off your list. After you have signed up with a debt consolidation program, you will have to provide that level of information in order for the company to be able to work with your creditors. For the purposes of a quote, it is not necessary, and could open you up to identity theft or other fraud.

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.

Dont let yourself be pressured into signing up immediately. Often employees at debt consolidation services are taught to heighten your fears in order to close the sale. Make sure to take some time to really evaluate your options before deciding to go with one company over another. Do your homework first. You didnt get into this situation overnight; you can take a little time to logically determine your options.

Finally, before settling on a debt consolidation service, you need to do a little research on the companies you are considering. Find out if they are legitimate. Check with the Federal Trade commission and Better Business Bureau to see what kinds of complaints have been filed against the company and how many. If you see complaints mounting into the high double digits, youll do better off elsewhere. Call your State Attorney Generals Office, they can provide you with useful information about the company as well. Chances are, if the company is not reputable, youll know that from these three sources. You will also want to do a google or yahoo search on the specific debt consolidators you are considering to see what others have experienced. If theres a problem, youll find out quickly.

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.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Harold Throope, who has been writing about personal financial matters for more than three decades, has written an easy to follow five step debt consolidation program. You can obtain this free guide, along with other valuable information about the best debt consolidation organizations, on his site.