How to Evaluate Debt Consolidation Companies

If you’re under pressure from credit card debt, you have a lot of company. Total card debt in the United States of America is approaching $1 trillion, almost 18 times higher than 1980 levels and in excess of quadruple the 1990 levels.

Approximately 2.7 million American consumers received some manner of debt relief on their credit cards during 2008. This is the highest total on record according to David Robertson who is the publisher of The Nilson Report, a payment industry newsletter.

Debt consolidation is often prudent in theory when you are in extreme credit card debt. Credit cards usually carry a much larger interest rate than other debt—even an unsecured loan from a bank! Consolidation lowers the total interest and the total cash flow paid towards the debt allowing your debt to be paid off sooner while incurring less interest.

Dealing with debt can be nerve-racking, and sometimes the debt seems so devastating that it feels like there is just no way out. There is light at the end of the tunnel though; there are ways you can consolidate your debt and get a more affordable monthly payment, which can help you increase your credit score. Following is some advice on how to select a reputable firm to assist you with your debt consolidation.

Ask people you trust for recommendations. One of the top ways to locate a reputable, established debt consolidation organization is to ask family and friends if they can suggest one, preferably one they have used and had a positive experience.
Get in touch with the National Foundation for Credit Counseling, a nonprofit organization. On top of providing priceless information about debt consolidation, the National Foundation for Credit Counseling also has a register of debt consolidation counselors all over the country.
Make certain that the debt consolidation company you are taking into consideration is a nonprofit. Stay away from for-profit debt consolidation companies unless you conduct a thorough investigation in the beginning to determine they are legitimate.
Investigate the debt consolidation company’s background with the Better Business Bureau (BBB) to verify its reputation and see if there have been complaints or lawsuits filed against the company.
Contact the attorney general in your state, who can let you know if the debt consolidation company you are considering working with has complaints against it. They will also know how many complaints have been received and whether or not the company is licensed to legally operate in your state.
Ask ample of questions of the debt consolidation company’s representative before you sign up for anything. Conduct a formal interview so you can decide if you feel comfortable working with this particular company.
Make certain that the debt consolidation company reviews all of your financial information thoroughly before offering a solution. If not, find another debt consolidation company fast!
In conjunction with your debt consolidation counselor decide the best way to consolidate your debts. Your options may include taking out a personal loan, refinancing your mortgage, negotiating with creditors, or taking out a home equity loan.

How to find a legitimate credit counselor

There are several important criteria when selecting a credit counselor. There are numerous unscrupulous debt management companies which exist only to scam money from people, instead of helping them repay their debts. First, a legitimate credit counselor should have your best interest at heart. Don’t pay any fees before consultation, and don’t hesitate to ask any questions you may have. If the counselor fails to satisfy you in any way, you should move on to another company.

You should try to find a credit counselor who is affiliated with national accrediting organizations in their field. While accreditation is no guarantee of legitimacy, it does suggest that the organization has stood up to some form of scrutiny.

A legitimate credit counselor should present a wide-range of services. There is no one-size-fits all approach to debt consolidation. Be cautious of any counselor or firm that offers only debt consolidation or settlement options. Additionally, any company that requires you to pay an upfront fee prior to any consultation should not be trusted. If the counselor can’t offer you answers before collecting a payment, they probably won’t be able to help you in the long run. The typical fee for enrollment in a debt management program varies but sometimes fees can be waived in the case of true hardship.

Tips & Warnings

Carefully look into any debt consolidation company before you sign on, as you don’t want to be trapped in a scam that can eventually make your credit much worse than it is now.
Always take your time when choosing a debt consolidation company; do not rush to make a decision.
Avoid any debt consolidation group that makes big promises and guarantees quick resolution. Remember if something sounds too good to be true, it probably is.
Approach debt consolidation companies based in Maryland and Florida with great care, as neither state regulates such businesses.
If the potential debt consolidation company states that you have a prearranged time limit to make your decision or the offer will be rescinded, find another debt consolidation company.