Credit consolidation is undoubtedly a good option to get out of debt but it may have several side effects. Not all credit consolidation firms can be relied upon. You may have come across many websites of debt consolidation companies that have emblems of BBB posted on their websites. These companies may have been accredited by the Better Business Bureau but behind the scenes these companies may be carrying out illegal activities.
Given below are few instances the credit consolidation companies camouflage their illegal activities.
• They camouflage as non profit credit consolidation companies
You may have come across several debt consolidation companies that call themselves non profit firms. Not all non profit debt consolidation firms are scam artists but you have to identify one. These credit consolidation companies will negotiate with your creditors and get the interest rate and monthly payments lowered. However, the payments you make to the creditors are pocketed by them as their fees.
• They charge very high upfront fees
One of the common complaints that the state attorney generals, BBB, state regulators and Federal Trade Commission receive is that these companies charge very high upfront fees. But in most of the cases it is seen that these companies fail to deliver what they promise to the debtors.
• The company wants your bank account number, Social Security Number and personal information
When you are planning to seek professional assistance to get out of debt, you find out the credibility of the different credit consolidation companies. These companies have the right to know the names of your creditors, the interest rates according to which you are currently making payments and outstanding balances. However, stay away from credit consolidation companies that ask you for your Social Security Number, Bank details and personal information.
So, if you are planning to get rid of your debts by opting for credit consolidation, make sure you select the right debt consolidation firm. This is because the effectiveness of the debt help option also depends on the credit consolidation firm you choose.
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If you are one of the millions of us drowning in huge federally guaranteed student loan debt, and burdened with high monthly payments we can’t afford, there may be help out there for us. A new federal program called Income Based Repayment (IBR) began July 1, 2009. Income guidelines have to be met in order to qualify. Loans in default do not qualify.