Debt Consolidation Scams and How You Can Avoid It

Debt consolidation is an effective way to eliminate debt if done the right way. There are a lot of debt consolidation companies around but it is important to remember that not all of them are legitimate.

Most of the time, people who get caught up with become vulnerable and easy target for scammers. Below are some ways on how you can get scammed by fake debt consolidation companies:

1. Some companies would require you to pay an upfront fee.

2. After signing up for a debt consolidation program and submitting your payments, the debt consolidation company may not distribute your money to your creditors. You may be surprised to find out later on that none of your payments were sent and that you are stuck with more debt than before you consolidated.

3. Some companies claim to be non-profit yet charge their clients with unreasonable fees and hidden fees

Getting involved with these scammers will eventually result to a deeper debt problem. Increased interest rates, more penalties and negative remarks in your credit report are just some of the problems you are about to face. To top it all, some people even went bankrupt after dealing with consolidating debts with the wrong company.

Are there ways to avoid getting scammed? How can you find legitimate debt consolidation company?

Consider the following tips:

Think First.

Never make decisions without weighing the pros and cons of each of your possible options. Making quick decisions can get you in a lot of trouble.

Research and Ask.

When looking for a company to handle debt consolidation for you, it is important to do your own research about the consolidator’s background, reliability and legitimacy. You can also ask relatives or friends who may have experience in debt consolidation for suggestions and opinions. They might have an idea about which company is reliable and legal.

Another way to do your own investigation is by searching the internet. There are also consolidators offering free quotes online. When gathering quotes online never give out your account numbers, social security number or other personal information.

Involve Your Creditors.

It is a must to ask your creditors if they are willing to work with your chosen consolidator. Since most creditors are used to dealing with different financial companies, it will be best to ask their opinion as well. Being in the business for the long time, these creditors know who to trust or not.

Read the Fine Print.

In every agreement or deal, it is important to read and understand every detail stipulated in the contract before signing it. Make sure that there are no hidden charges and penalties.

Confirm Before Paying.

Before you start paying your chosen consolidator, ensure that your creditors have already accepted the company’s proposed plan.

Monitor Your Payments.

It is important to keep track of every payment you submit and call your creditors regularly.


About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2010

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