Some people are so desperate to get rid of their debt as soon as possible that they do not put in much thought and research into choosing a debt consolidation company. This goes in favor of the fraudulent companies who are always on the lookout for such desperate clients, as they are easier to scam.
Possible Debt Consolidation Scams
When looking for a debt consolidation company, watch out for these following scams to avoid falling prey to their fraud:
Promise To Remove All Debt
Any debt consolidation company that claims to get rid of all of your debt is trying to rip you off. Your debt cannot vanish – you ultimately have to pay it off to get rid of it.
No Financial Review
If a company asks you to take out a loan without fully reviewing your financial situation, it is most likely trying to scam you.
Exceptionally Low-Interest Rates
If a company offers an unusually low-interest rate, it means it is concealing hidden charges which it will reveal once you have enrolled in the debt consolidation program, thereby increasing your overall consolidation costs.
High Upfront Fees
If the company asks for an alarmingly high upfront fee in exchange for their services, consider it a warning sign. Under the Credit Repair Organizations Act, you are not required to pay anything to the debt consolidation company until they have effectively completed the services they promised.
Seeking Redundant Personal Details
A debt consolidation company is supposed to provide you with a quote just by asking for your creditor’s names, balances and their interest rates. If it asks you for additional information like your account details, social security number, or any other personal information before you sign an agreement, it is not a good sign.
Offering Unethical Advice
A fraudulent debt consolidation company will offer unethical advice like not to contact the credit bureau, avoid credit counseling, or to not pay your debts in order to deposit money into a trust account. You might even be asked to create a new credit identity because your current credit identity is too weighed down with massive debts. If a debt relief company gives any such advice, its intentions are definitely shady.
How to Avoid Debt Consolidation Scams?
Before you enroll in any debt consolidation program, check out the following:
- Accreditation with the Better Business Bureau to confirm that the company is legitimate.
- The past record of successful debt consolidations.
- Consumer complaints that might have been lodged against the company.
- Referrals from friends or testimonials and reviews over the internet about the company.