Consolidating Debt? 5 Warning Signs Of A Shady Debt Management Company

Unfortunately, not all debt consolidation companies are legitimate

. To avoid the shady companies, educate yourself on the debt consolidation process and watch out for these warning signs.

Quote Unusually Low Monthly Payments

A debt consolidation company works with creditors to lower your interest rates. Creditors have predetermined rates that they will lower to, so every debt consolidation program will get you the same rates. But since 2004, creditors no longer accept reduced minimum monthly payments. Companies who quote unusually low monthly payments are probably giving you a low figure, which they will raise once you are in the program. Instead of comparing monthly payments, request information on their fees. Demand All Debts Be Included Companies who demand that all your debts be included in the debt consolidation dont have your best interests in mind. Some loans, such as credit union loans, are ineligible for lower interest rates. And other types of credit, like student loans, may already have a low interest rate. However, by including all your bills in the monthly payment, the company can charge you a higher fee for handling more accounts. Before you enter a program, decide which accounts you want to consolidate for lower rates.

Charge High Upfront Fees

The most common scam is to charge high upfront fees, up to thousands of dollars, for services. Sometimes companies will promise to refund fees on completion of the program, but few clients actually complete the program. Legitimate non-profit companies charge a flat monthly fee for each account handled. They are usually subsidized by financing companies. For profit companies will charge a competitive fee along with a flat monthly charge.

Consolidating Debt? 5 Warning Signs Of A Shady Debt Management Company

By: archerfraizer

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