Debt Consolidation Loans

Tips to Avoid a Debt Consolidation Scam

If you decide debt consolidation is the best way to pay off your debts, be on the lookout for scams, as you should be with all the debt solutions. Know the signs of a debt consolidation scam and be prepared to walk away if things seem shady.

Advance Fee for the Loan

Some debt consolidation loan scams are really just advance fee loan scams. It’s against the law for companies to require you to pay upfront to receive a loan, so if any company asks you to send payment to secure a loan, be prepared for a scam. Advance fee loan scams most often ask you to wire money or send funds via certified check. Unfortunately, once the company has your money you may never hear from them again. Legitimate debt consolidation loans will have an application process and will do a credit check before they can give you a loan amount, interest rate, or even approval.

Debt Settlement Disguised as Debt Consolidation

Debt consolidation involves paying off your debts using a large lump sum loan. Debt settlement, on the other hand, involves paying your debts at a lower cost. There have been companies who market themselves as debt consolidation companies, but really provide debt settlement services. If you fall prey to one of these scams, unfortunately, you may not find out until several months later when your creditors contact you. Ask detailed questions about the type of services the debt consolidation company provides and move on if you can’t get clear answers.

Too Good to Be True Promises

While it’s true that your monthly payment may decrease when you get a debt consolidation loan, it probably won’t drop by 30% to 50% as some debt consolidation companies promise. You may be able to get a lower interest rate, but that rate depends on your credit history and it can’t be promised until the lender has done a credit check. Finally, debt consolidation companies can’t erase negative information from your credit report. Sure, the loan may clear up past due balances when they’re paid off, but the delinquent status will stay on your credit report through the credit reporting time limit.

Little Details About the Lender

When you’re taking out a debt consolidation loan, it’s important that you know who you’re borrowing from. The lender should be willing to give their business name and address – an email address and toll-free telephone number are not enough to identity a legitimate business. No matter the reason, if a lender isn’t willing to tell you who they are and where they’re located, walk away. There are better options.

Related posts:

1. Warning: How to Spot a Debt Consolidation Scam
2. How to Choose a Debt Settlement Company
3. Debt Settlement DIY vs. Debt Settlement Services
4. Beware of These Debt Free Scams
5. Will You Qualify for a Debt Consolidation Loan?
6. How To Check On A Debt Consolidation Company
7. How To Settle Your Debt
8. Debt Consolidation Loans Help You Simplify Debt Payments
9. How to Know When Debt Consolidation is Right for You
10. Clearing Up the Confusion Between Debt Consolidation and Credit Counseling

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