Individuals often make mistakes while searching for a way out of difficult debt situations, which later on affect them and their finances in a negative way. You should be extremely careful while choosing debt consolidation as your debt relief option. The following guidelines might be able to help you avoid mistakes and scams.
6 debt consolidation tips you should follow
Check out the 6 consolidation tips which you should follow:
- Inform your creditors: Notify the creditors/collectors about your enrollment, and make sure you get a receipt from them after each payment. This helps you avoid scams later.
- Keep a record: Maintain a record of your payments and ensure that they are properly updated.
- Send regular payments: Make your monthly payments on time.
- Devise a plan: Develop a strategy to make the required payments. Look for ways to pay off your debts in a timely manner.
- Earn more: Make money online and use the dollars to pay back your creditors sooner. Check credit report: After you have paid back your creditors, pull your credit report, and find out if the status of the accounts has been updated as "Paid in Full".
What are the 11 ways to select the best debt consolidation company?
Often, consumers are not comfortable about consolidating debts on their own. In such a situation, it will be wise to get debt consolidation help from a professional company. Check out the following tips that can help to select and work with the best debt consolidation company in your state:
- Accreditation: Before signing any contract with the consolidation company, find out if they are accredited by the National Foundation for Credit Counseling (NFCC) or Association of Independent Consumer Credit Counseling Agencies (AICCA). Usually, reliable debt consolidation companies are member of these organizations. Moreover, find out if the company is accredited by Better Business Bureau.
- Recommendation: Ask your family members if they know about a reliable consolidation company. If any of your friends has worked with a consolidation company in the past, then ask him to give you the contact details. Get in touch with company representative and start the preliminary discussion.
- Consumer feedback: Any good consolidation company will have its own website. Go to the "customer feedback” or "client testimonials” section of the website. Read through the testimonials, and find out what the present and past customers have to say about the service of the company. If the greater percentage of the customers is happy with the service of the debt consolidators, then you may think about striking a deal with the company. If there are too many unresolved customer complaints against the company, then it is advisable to not work with the debt consolidators.
- Success rate: Check out the success rate of the consolidation company. The success stories will give you a fair idea about the negotiation skills of the debt consultants. Figure out how many people have actually been able to clear their debts with the help of the consolidators. Many a times, the consolidators fabricate success rates to lure customers. So, talk with the existing customers to verify the claims made by the consolidators.
- Reviews: You can get online reviews of consolidation companies from different websites. You can also go to various financial forums, and find out what the experts have to say about the services of the company. If most of the people have negative opinion about the services of the company, then it is definitely not the best debt consolidation company.
- License: Many states require consolidation companies to be licensed. Some states even require the consultants to be licensed. So, check if the company is licensed in your state. Contact your State Attorney General to know whether or not the consolidation company is licensed to operate in your state.
- Expertise: You need to know if the consultant is qualified enough to give you counseling, and help you get out of debt. Get to know whether or not the consultants are certified by a reliable organization. Ask different questions to the consolidator. If he can give you the correct and informative answers, then it signifies that the consultant is a good one.
- Fee: You may not be aware that FTC has banned the debt relief companies from charging upfront fees. If the debt consolidators ask you to pay an advance fee before enrolling into a personal debt consolidation program, then refuse to make any payment. It is better to not enter into any agreement with the company only. This is a sign of a debt consolidation scam.
- Contract: Before sending payments to the company, ask the consolidator to draw up a contract. Abstain from entering into any kind of verbal agreements as they are not legally binding. Once the contract is made and mailed/faxed to you, go through the terms and conditions of the agreement. Only when you understand the clauses of the contract, put your signature on the paper.
- Contact details: Good consolidation companies will have a proper mailing address, phone number, fax number, and email address. So, find out if the company you're planning to work with has proper contact details.
How can you avoid debt consolidation scams?
In recent years, debt relief industry has been flooded with scams. A lot of consumers get cheated by unscrupulous companies while looking for financial help. You should be particularly careful while trying to find online debt consolidation companies. Also, a company may not be a scam but the service it offers may not be satisfactory. Check out the following points to avoid consumer debt consolidation scams:
- Do not select a company that is not licensed: A fraudulent company or the attorney does not have the appropriate license.
- Avoid companies who try to pressurize you: Maintain a safe distance from companies who try to pressurize you into making quick decisions or make false promises. Stay away from spam emails, letters, and phone calls by the company.
- Avoid those who seek redundant personal details: Your identity might come under risk if you divulge about your social security number, account details, and other personal information to any and every company. Do not give out any of your personal information to a consolidation company, unless you agree to their proposals and decide to go with them.
- Avoid companies asking upfront fees: Stay away from those companies that ask for fees before your situation has been evaluated.
- Stay away from companies offering exceptionally low interest rates: Demand for a full disclosure of fees and interest rates before you enroll with a company. Companies offering low interest rates might be concealing hidden charges, which might increase your costs later on.
- Don't trust if they offer unethical advices: If you're dissatisfied with the advices offered by a debt consolidation company, treat them with caution. Suspicious and unethical advices like getting a duplicate credit identity, not to go for credit counseling, not to contact the credit bureau etc. should never be followed in blind faith.
- Ignore companies making impossible promises: You haven't accumulated debt in one single day. So, you can't get rid of it within 2-3 days either. It will take several months to clear all your dues. Any company which makes a promise of getting you out of debt within a week is fraudulent. Being careful is the only way you can avoid scam.
Can you get free debt consolidation services?
There are nothing called free debt consolidation services or free debt consolidation programs. You need to understand and accept this fact. You'll have to pay for using debt consolidation service. You'll have to pay a fee after a written agreement has been signed, a payment plan has been agreed upon, and the creditor has received minimum one payment. You'll have to pay a fee on the portion of the money saved in overall. Even then, the consolidation companies can't charge an enormous fee for its services.
Should you go for non-profit debt consolidation?
If you're thinking that "I will consolidate my debt by paying a small fee", then non-profit debt consolidation is a good option for you. A non-profit debt consolidation company works just like a normal for profit consolidation company. They will communicate with your creditors and help you consolidate bills through one easy monthly payment plan.
Contrary to the popular notion, the non-profit companies do charge a nominal fee for the services provided by them to the consumers. These companies mainly thrive on donations made by various individuals and companies. If you're really interested in working with a non-profit debt consolidation company, find out if they have a 501(3)(c) certificate from the IRS. This will help you know if it really is a non-profit consolidation company.