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Avoiding Debt Consolidation Scams

Detecting a debt consolidation scam is easy, once you know what to look for.

The following are some of common debt consolidation scams, practiced by fraudulent debt consolidation companies:

• Exceptionally low interest Rates:

If the company quotes an exceptionally low interest rate, it means the company is concealing some hidden charges that it are likely to be revealed later on, thereby increasing your consolidation costs. Therefore, it is advisable that you insist on getting full disclosure of the company’s fees before enrolling.

• High Upfront fees:

If the company asks for high upfront fees in exchange for their services, it is better that you avoid the company. Under the Credit Repair Organizations Act, debt consolidation companies cannot require you to pay anything until they have successfully completed the services they promised. If you are asked you to pay more than a predetermined percentage based on your debt, you should avoid that company.

• Seeking redundant personal details:

If the company asks for your social security number, your account details, and other personal information before providing a quote, you should go elsewhere. No one should ask for your personal information before you sign an agreement. Giving out this kind of information could lead to having your identity stolen.

• Offering Unethical advices:

Most fraudulent debt consolidation companies will offer you unethical advice such as not to contact the credit bureau, not to go for credit counseling, or to stop paying your debts in order to deposit money into a trust account. They may even suggest you create a new credit identity because your present credit identity is too burdened with enormous debts. If a debt relief company advises any of these things to you, then the company’s intentions are definitely shady.

How to avoid debt consolidation scams?

Individuals deep in debt and worried about their finances are ideal catches for scam companies. So, before you enroll in any debt consolidation program, be alert and check out the following:

• The company’s accreditation with the Better Business Bureau: The very first thing you should do is check whether the company is accredited by the Better Business Bureau. BBB accreditation guarantees that the company is legitimate.
• Check the company’s history: Before you enroll, take some time and look at the company’s past record of successful debt consolidations. Check if any consumer complaints have been lodged against the company.
• Look for company testimonials: You can ask your friends and acquaintances about their opinion of the company. You can also look the company up on the internet to find information and company reviews.

Being in debts is stressful. But, that should let you fall prey to debt relief scams. All you need to do is keep yourself calm and weigh all the pros and cons before enrolling with a debt consolidation company.