Debt Consolidation Scams: Learn All About Them So You Can Avoid Them

debt consolidation scams

Plenty of entrepreneurs have gotten into debt when they were trying to start their businesses. If this is your situation, and you find yourself in over your head, you might find it tempting to seek out a debt consolidation loan. However, you need to watch out for debt consolidation scams. If you should happen to fall victim to a debt consolidation scam, you’ll have more to worry about than your debt crisis.

 

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Therefore, before you agree to a plan from a debt consolidation company, consider the points below.

 

Steer Clear of Companies That Pressure You

Beware of a debt consolidation firm that tries to pressure you into agreeing to a plan. Also stay away from those companies that make promises about what they can do for you before they look carefully into your particular situation. Both of these are red flags that you might be dealing with debt consolidation scams.

 

Carry out Your Research

Research the company carefully, and take your time to do this. For example, look at the services they offer. The company which offers a range of options, along with education concerning how to handle debt, could be a better choice for you.

 

 

Review the Debt Consolidation Company’s History

Before you enroll in any debt consolidation plan, check the history of the company carefully. That is, look at any records of successful debt consolidations that the company has pursued. Also, find out if any consumer complaints have been lodged against the company.

 

Check out Company Testimonials

Review the company’s testimonials. Ask friends and acquaintances if they have heard anything about the company you’re considering. If anyone you know has used this company to consolidate their debts, ask for their opinion about their experience with the company. Additionally, search for the company online. Can you find any reviews or any other information about them?

 

Ask Your Creditors About Debt Consolidation Scams

Be sure to contact your creditors and consult with them about your plans. Ask them about debt consolidation scams they are aware of. Also ask them if they are willing to work with the company you have chosen.

 

Look at the Debt Consolidation Agreement Closely

Most of us don’t take the time to read the fine print. However, it’s a really good idea to review the agreement in detail before you sign it. Look to see if it explains the debt consolidation company’s responsibilities as well as yours.

 

Make Sure Your Creditors Have Accepted the Plan

Before you begin paying the debt consolidation company, make sure that your creditors have actually accepted the company’s proposed plan. Until they do, continue to pay your bills just as you have been doing.

 

Always Be Alert

After you start the program, watch your statements carefully. Call your creditors to make sure that they are receiving their payments.

 

Watch out for Excessive Fees

One of the signs of debt consolidation scams is excessive fees.

There are some debt consolidation companies that might fail to let you know in the beginning about some excessive fees they charge. While the particular company you’re dealing with might not be an out-and-out scammer, the result could be fees that add up to even more debt for you. Therefore, be on the alert for any of the following fees:

  • A fee that’s equal to a portion of the full debt, sometimes amounting to 18 percent of the total
  • Any monthly fees, either service charges or some other flat fees
  • A sign-up fee or any other upfront fee
  • Some portion of the amount you’re purportedly saving by consolidating your debts, sometimes as high as 25 percent

 

Avoid Voluntary Fees

Stay away from companies that insist on your paying what they like to call “voluntary fees.”

 

Watch for Red Flags and Stay Safe

If a debt consolidation offer seems too good to be true, it probably is. Additionally, keep in mind that no new loan will free you immediately from your debts. You will need to be patient when you’re working on getting out of debt.

What’s more, don’t be tempted into a trap that leads you into even more debt. Your primary aims should be the long-term stability of your business as well as the financial well-being of your family and yourself. Those are worthy goals that are deserving of your time and effort.

There is no doubt that being in debt is stressful. However, look for a good Debt Advisory Service and see if they can help you.


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