How Not to Get Scammed by a Debt Consolidation Program
A Credit Article Contributed by Mark Mcclelland
Watch out for These Warning Signs When Looking for a Debt Consolidation Program
The old saw, 'if it sounds too good to be true, it probably is', was true for our parents, it's true today, and doubly so when it comes to the debt consolidation program industry. You've all seem the come-ons: reduce your debt by 50%', 'get you debt-free' in less time than you'd believe possible', 'restore your credit history so you can buy the things you deserve', and more. Well, you don't believe them, do you?
If not, that's good. But it sure would be nice if they were true, wouldn't it? But that's just what these unscrupulous firms want you to believe - that their claims are true. If the claim sounds fishy, you can bet that the company stinks.
Shy away from any company that requires an upfront fee payment before doing any work, or a company that won't disclose it's fee and charges schedule for any reason before you agree to work with them. Beware of companies that claim to be able to reduce the amount of debt you owe - they can't. The same goes for companies that claim that they'll be able to restore your good credit history, even if the notations on it are accurate, timely and legitimate - they can't.
If a company claims to have a "special relationship" with your creditors seek help elsewhere - there are no such things as "special relationships".
And understand that just because a company enjoys non-profit status doesn't mean it cares a whit about you. Non-profit status is no guarantee that the organization is on the up an up.
What Will a Good Debt Consolidation Program Do for You?
First off, a debt consolidation program is not a loan, it doesn't provide a free ride, and it won't get rid of your debts. These programs are set up primarily to help you get your interest rates reduced, eliminate late-payment fees and other charges, and lower your monthly payments - on your unsecured debt - to a level that both you and your creditors can live with. Note that these programs only deal with unsecured (credit card, personal loans, and medical bills) debt.
Organizations like the various Consumer Credit Counseling Services and Myvesta.org can help you set up a debt re-payment that pays off your debts in three to five years or so. But understand that participating in a debt consolidation program will in all likelihood affect your credit report because some creditors see your participation in such a plan as an admission that you're unable to properly manage your finances.
All reputable credit counseling organizations will provide the following services when setting up your debt consolidation program:
* After providing them with your relevant financial details, including both secured and unsecured debts, the account number of your unsecured creditors, etc. your income, your marital and familial status, a counselor will help you work out a budget to determine how much you can apply toward debt repayment.
* The agency will work directly with your creditors to develop a specific repayment plan that you can all live with
* You make a monthly payment directly to the agency, which, in turn, will pay your creditors on your behalf.
* Normally the credit card and other accounts that are being paid off through the debt consolidation plan are either closed or frozen until the debts are paid in full.
Where to Start Looking for a Good Debt Consolidation Program
A really good place to start looking for reputable services is on the Internet, of course, and then with the National Foundation Consumer Credit (NFCC), which is the oversight organization for the various non-profit Consumer Credit Counseling Services (CCCS) as well as for the for-profit Accelerated Debt Consolidation Corporation.
