Dealing with debt can be frustrating and stressful. At times, you may feel like there is no way out. Yet several debt relief opportunities exist. One of them is debt consolidation. Companies providing debt consolidation services combine all of your debts into one loan, so you can simplify bill paying by owing to just one creditor. If you decide to go this route, take time to review this advice when choosing a debt consolidation service.
- understand debt consolidation service
- seek out recommendations and referrals
- ask questions
- make sure the company considers your individual situation
- check the debt consolidation company’s record and reputation
- look to a debt consolidation service to solve all your problems
- assume that all debt consolidation services offer the same things
- let costs be your only consideration
- expect to obtain additional credit
- act too quickly
While you can obtain your own loans or funding, and consolidate your debts on your own, debt consolidation services also exist. These services – which often require equity such as a home or a car – ask consumers to make one monthly payment, which then is used to pay creditors. Consumers pay back 100% of the debt, plus interest. If the problem is too many accounts with too-high minimum payments at crippling interest rates, these services may offer a solution.
One of the best ways to find a reputable debt consolidation provider is to ask family members, friends and associates for any referrals. You may be surprised to find out how many people have looked into debt consolidation and/or used the services of a debt consolidation provider.
Do your homework, and speak with at least a few different debt consolidation services before signing up. Make sure you understand how they work, how they assess fees and how long you can expect to work with them.
A reputable debt consolidation company will review your finances carefully with you before offering a solution. The representative should be able to determine if debt consolidation is a good option for you, and if not, suggest other possible debt relief alternatives.
Take time to do online research to check out a company’s history and reputation. You can check with the Better Business Bureau to see if a company has had complaints filed. Perhaps the most important thing is to look at how a company resolved any complaints. Reliable companies also are often accredited by the American Fair Credit Council.
Be aware that while laws vary by state, most states do require licensing of some form for companies that lend money. The is especially true if the debt consolidation loan is a mortgage, as the case with refinancing or home equity lines of credit. You can start your research here with your state’s Office of the Attorney General.
Remember that debt consolidation services ask you to make one monthly payment, which then is used to pay creditors. You’ll pay back 100% of the debt, plus interest. You’ll also need to change your spending and saving habits to avoid getting into the same situation again.
One may offer a service that gets you out of debt as quickly as possible; another may have the lowest overall costs; still another may do the least damage to your credit score. Take time to define your goals so you can ask the right questions when you interview companies.
Debt consolidation services can charge very high fees, but don’t let costs be your only consideration. Choosing the firm with the lowest fees may not be the best option; some services may provide an unrealistically low estimate. Look for a provider that you have researched and believe will do the best job for you.
Those working with a debt consolidator will likely sacrifice the freedom to open and use additional credit lines during the process. In many cases, individuals’ credit profiles will be negatively impacted as well.
The reality is that scams exist, and people seeking help for financial difficulties are more vulnerable. Guard your private information, and only share your financial information or social security number when you are sure you are dealing with a reputable provider. If something sounds too good to be true, it probably is.
If you are facing too many accounts with too-high minimum payments at crippling interest rates, debt consolidation services may offer a solution. The rule of thumb in choosing a company is “buyer beware” – of high fees, empty promises, and poor reputations and records. Do your homework and research carefully before choosing a debt consolidation provider.