subject: Evaluate The Company Before Choosing A Debt Consolidation Service [print this page] Evaluate The Company Before Choosing A Debt Consolidation Service
The middle class is currently living through one of the most difficult times in modern history. Millions of citizens throughout the U.S. have fallen into deep debt. In some cases, it is due to their inability to manage their credit cards in a responsible manner. In other cases it is because they have lost their jobs and are basically living paycheck to paycheck. And, in other cases, they are simply poor money managers. To get by, many hire a debt consolidation firm to make the payments for them.
Although, not always implemented well, the general concept is relatively simple. You pay the debt consolidation company a lump sum of money. In return, they will take control over the repayment of some of your debts. First, they will take responsibility for making payments to your creditors. They do this by making periodic payments from the monies that you pay to them each month.
Some of these agencies will also take additional steps. They may attempt to negotiate with the various creditors to reduce the interest payments and penalty fees that they may have imposed on you. Having this load taken from their shoulders is what attracts many people to sign up for these services. But, before you sign, there are a few drawbacks that you should be aware of.
Probably, the foremost drawback is that you simply can't take some of them at their word. Said another way, they often promise more than they can deliver. For example, you may have been drawn in by promises of an easy loan that you can get to pay off your outstanding creditor debts.
If you are typical, however, then you have probably been in debt trouble for a while. As a result, it is almost a certainty that your credit score has already taken a big hit. Therefore, you will actually end up paying more for this loan. It may seem like you are paying less, however, because the payments that you make will be spread out over a longer period of time.
In other words, in the short term you win, but you lose in the long term. While, in most cases, you end up ultimately paying more than what you currently owe your creditors, you pay less on a month by month basis.
Debt consolidation services have another potential drawback as well. And that is that some of them fail to make payments to your creditors that they have contracted to. Whether it is because of internal office efficiencies or simply fraud, a debt consolidation company may make payments to the creditors either late or not at all. As a result, not only will your credit score take a big hit, but you will still end up owing money to your original creditors.
Because of these two, not inconsequential, disadvantages, it is more incumbent than ever that you perform adequate due diligence prior to signing on with any agency. And, many times, you will discover that there are less radical paths to resolving the ongoing debts that you have incurred.
