How to Find a Reputable Debt Consolidation Company

If you need help consolidating your debt, you’ll find a wide variety of debt consolidation companies ready to help you. Be very careful when choosing a company. A good debt consolidation company can help you get out of debt faster and teach you how to stay out of debt, but a bad one can make your situation much worse.

Popular Debt Consolidation Tricks

The promises made by debt consolidation companies sound good, but many of them are actually tricks designed to part you from your money. Beware of the following tricks:

Quick-Fix Debt Consolidation Loans

The offer sounds good: with one simple loan, you can cut your monthly payment in half. The truth is much more complicated. If your finances are in really bad shape, you probably won’t qualify for a decent interest rate. The loan you get may indeed have lower payments, but you’ll pay over a much longer term and often with 21-22% interest.

Mandatory Monthly Fees or Donations

Although the debt consolidation company claims to be a non-profit, they add an additional monthly fee, often 10% or more, or a hefty upfront fee to your debt package. If you can afford that extra 10%, you’re better off negotiating directly with your credit card company to lower you interest rates and adding that fee amount to your payments.

Stopping Payment on Your Debt

The debt consolidation service may advise you to stop paying your debts until your plan starts, but that will only result in late fees being added to your account. Some consolidation companies are also notorious for making late payments once you’re in the plan.

High Pressure Sales Tactics

If a debt management plan or debt consolidation loan is right for you today, it will be right for you tomorrow. A legitimate offer doesn’t have a 24-hour, or even 72-hour, expiration date. Take your time to choose the right solution to your debt. Don’t succumb to pressure to sign up today to lock-in a great deal.

Big Promises, Little Delivery

Some companies make big promises to repair your credit, fix your score, and reduce your debt. The only way to repair your credit or fix your score is to get rid of your debt and wait for delinquencies to receive a lower weight in your score calculations. A debt consolidation loan will reduce your debt, but only if you make regular, on-time payments that don’t include high fees.

How to Locate a Reputable Debt Consolidation Company

If you do want to consolidate your debt, contact the National Foundation of Credit Counselors for a referral to a reputable local credit counseling service. You can also use the Bills.com Savings Center to find a consolidation loan from our family of lenders.

Before you sign anything, contact your state’s Attorney General’s office to make sure the company is licensed and doesn’t have complaints filed against it. Avoid any company based in Florida or Maryland because those states don’t regulate credit counseling services.

Interview the service before you sign up. A debt consolidation loan may be just one of the options they recommend after reviewing your finances. Don’t agree to services from any company who recommends a solution before comprehensively reviewing your finances.

Common debt consolidation options include home equity loans, personal loans, cash-out mortgage refinancing, and debt management programs. If you own a home, you may be able to get a home equity loan or refinance on your own and avoid paying any debt counseling fees.

You may feel stressed by your debt, but rushing into an agreement with a fraudulent debt consolidation company will only make your situation worse. Consider your options carefully before you do anything.

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