Debt Consolidation Scams
What You Need to Know

Unfortunately, debt consolidation scams exist and people fall for these so-called helpful services everyday. These scams can be confusing and convincing, so beware.

The websites that sell these services try to make you believe and trust that they have your best interests in mind. Many don't, so be observant enough to know when something sounds too good to be true.

Make sure when researching debt consolidation offers that you read the fine print and understand the contract you are about to sign.

The first thing you can do to find a reputable company is to get a recommendation from a trusted friend. Another is to research the firm with the Better Business Bureau or stick with only well-known companies.

Types of Debt Consolidation Scams

Some companies may demand payment up front and then not deliver on debt repayment of your loans. Don't fall into this trap. Incidentally, in the US and Canada, companies are not allowed to request advance fees before the transaction is completed. You can check with the Federal Trade Commission (FTC) for more information. Never give your money up front until you have a signed agreement and you have researched appropriate references.

Another angle scammers use is to claim they are a non-profit organization. This may lead you to believe they are trying to do some charity work or government service and help you get out of debt. Don't fall for this, and don't think a convincing or official-sounding business name is legitimate. Do your homework, and don't be swayed by a professional looking website or pushy sales representative.

If you are taken in by one of these scams, you could actually be forced deeper into debt and run the risk of damaging your credit rating further. Always do your research and follow-up with pointed questions about anything that seems overstated or questionable. Remember, some people have even had to file bankruptcy after falling for one of these scams. Don't let it be you.

You need to take responsibility for your own credit situation and have some accountability to yourself. Don't just blindly trust someone trying to push something your way without doing some insightful and determined research first.

Taking Precautions Against Debt Consolidation Scams

Take the following steps the next time you are considering a debt consolidation program, or taking out a loan.

• Beware of high pressure sales tactics that make you feel like you need to sign right now. Also, be wary of anyone offering guarantees before they even know about your debt situation. If it sounds too good to be true, it probably is.
• Research the debt consolidation company you plan to deal with and understand what services are being offered. There are a range of options on how to consolidate and get rid of debt, so understand your alternatives.
• Check out on any company you might choose to use with the Better Business Bureau to make sure they don't have excessive complaints or a reputation for poor service.
• Contact creditors and inquire as to whether they are willing to work with the debt consolidation company. They may already be aware of certain scammers, and can warn you upfront.
• Read all contract agreements and take the time to understand everything contain herein—even the fine print. You don't want to sign something you don't understand.

Watch Out for Unexpected Fees

Be aware of any fees that a debt consolidation company might try to charge you. They can add up fast, so don't get surprised.

Here are some fee typs you'll need to understand and watch for:

• A service fee based on a portion of total debt. These can get expensive.
• Fee based on a portion of amount you will save. This fee may be arbitrary and hard to determine upfront.
• Debt consolidation sign up fees. They should be clearly explained at the start.
• Monthly service charges. The longer the process takes the more you'll end up paying in fees.
• Hidden fees and voluntary fees that don't make sense. Scour your paperwork for these gems.

Debt consolidation scams are an unfortunate reality of the world we live in, and one truth does exist. There are disreputable companies out there that will take advantage of you and try to take your money. Spend a little time reading the contract agreement to protect yourself.

Another clear truth exists as well. There are honest and responsible debt consolidators who want your business and will treat you right to get it and keep it.

Keep in mind that getting out of debt takes time and discipline, so don't expect miracles. You must fully understand that it will take a while to pay off your debt and restore your credit ranking.

Should you require a debt consolidation program of some sort make sure you keep paying all of your bills through your original creditors until you know the debt consolidation company has taken over making payments. This will prevent you from damaging your credit further or falling behind on payments and exacerbating your troubles. Monitor any statements you receive to make sure payments are being made.