Getting out of debt can be a long, hard road – especially if you’re trying to juggle several accounts at a time. If you’re tired of paying multiple bills every month, or if you want to get a lot of fees and finance charges waived, a debt consolidation service might be the answer. But how do you know if you’re signing up with a good one?
Debt consolidation companies don’t have a central regulation agency. That is, while the plans all follow similar guidelines, the quality of the debt counselors can vary. Fees can also vary. That’s why it’s important to know what you’re getting into before you sign any agreement with a debt counseling service.
Debt consolidators take a designated amount of money from you each month. This money is typically deposited into an account for debt repayment purposes. Then they take the money and use it to pay down your debt. Good debt consolidators have arrangements with various debtors, allowing them to waive fees and interest to get you out of debt faster. This is a win/win situation; you get out of debt and your creditors get paid.
Unfortunately, some consolidators have used shady tactics to make fast money. Rather than paying their clients’ bills, they pocketed some of the money for themselves. Or they charged hefty fees for their services. Others claim to rehabilitate your credit by making timely payments on your behalf, but end up delaying payments due to disorganization within their company.
To get the most out of your debt consolidation experience, you should consider a few things before you enlist. First, decide if this is actually the best approach for you. Debt consolidation works best for unsecured credit, so if you have lots of outstanding credit card bills, consolidation could be of great benefit.
Next, make sure you choose a reputable debt consolidator. Go with a non-profit agency that belongs to the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. Membership in these organizations proves that a consolidation service meets tough standards.
Finally, check out your chosen consolidator. Ask around, read independent reviews online, and look for complaints at the Better Business Bureau’s web site. This will give you an idea of how the business is actually run, and how organized and efficient they are.
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