What To Look For And Where To Find Legitimate Debt Consolidation Services
Many people were caught in the economic recession, and were not prepared for the significant and long-term issues that came with a sudden drop in the job market, loss of savings, and drop in the housing market. If you are now in a more secure financial position and want to reduce your debt burden, it will be important that you know what to look for and where to find legitimate debt consolidation services.
There are two types of debt consolidation available. The first, is to get a loan that will cover all of the debts with a secured loan. This is normally accomplished when a person owns their home and is in a position to get an equity, or second mortgage. The second is to work through a service provider who will evaluate your finances and income, then develop a plan for paying off your debts.
The service provider will contact your creditors with a repayment proposal and negotiate for a lower payment or some other relief, such as lower interest rate, extended payment period, etc. While getting a second on your home is fairly straightforward, working with a service provider will require that you take some important steps to make sure that you are able to achieve your goals within a reasonable timeframe.
When you are considering a provider, check their references and find out if they have had issues with consumers by contacting the Better Business Bureau, Consumer Protection Agency, and your local Attorney General’s Office. Another helpful source are your creditors. Many major credit card companies work with credit counseling and consolidation services and will make recommendations of the companies they work with.
A reputable service provider will be a member of the National Foundation for Credit Counseling and their representatives will be trained professionals who will be familiar with all of the options available to you regarding your bills. They will not make promises that they cannot fulfill or make guarantees that your unsecured debt will go away easily. There are other red flags that you should be aware of when you are comparing providers.
Some unscrupulous providers may talk about a potential governmental programs to bail out personal credit card, or other unsecured debt. Remember that if something sounds too good to be true, it probably is. A provider that implies there is a pending bail-out in the works is waving a red flag that you should take note of.
These types of providers may also guarantee that your unsecured debt will go away, that all of your bills can be paid off for a fraction of what is actually owed, or that all contact from creditors to collect bills, or lawsuits will be stopped. In reality, not all creditors will negotiate a lower interest rate or payment. Some creditors will not work with consolidation providers they will pursue payment through any means.
When a bill has been turned over to a collection agency, there is often room for negotiation on repayment. Collection agencies purchase debts from creditors for “pennies on the dollar”. Therefore, any amount they make “over” the pennies is profit and they will often negotiate a much lower repayment if you can pay the amount in cash. This will not improve your credit rating immediately, but the amount will be reflected as paid off.
Reputable service providers will spend time answering your questions and providing you with options regarding how you can most effectively pay off your debt. They will have a contract that clearly states the payment terms for services that includes the total cost. The contract will also include information about their fees, a detailed description of the services they provide and the length of time it will take to achieve results. A reputable provider will not try to sell you a program or plan, or rush you to sign a contract without fully explaining it’s contents.
It is important that you know what to look for when you are considering where to find legitimate debt consolidation services. The relationship you form with the provider can last for three years or more, so it is important that you feel comfortable and confident in the individuals you are working with. It will also be helpful to change your spending habits and learn about developing habits for maintaining your credit and savings.