5 Debt Consolidation Scams To Watch Out For |

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In recent years, the economy has caused a number of Americans to turn to credit as a temporary resolution to their money problems. This increase in personal debt has caused a substantial surge in the reliance on debt consolidation companies. If you?ve found yourself drowning in debt and are considering using a debt consolidation company as a way to help you get out of it, there are a few things you should know about how to choose the right one.

Some of these companies are completely forthright with their terms and conditions, and offer exceptional services that will provide you with quick relief. However, there are also many debt consolidation scams out there, and if you?re not careful, you can end up with more problems than you started out with. Here are a few examples of the tactics that fraudulent debt consolidation companies use to lure in those who require their services and will go to any lengths to get them.

Low Interest Rates

If you?re used to dealing with credit card companies who promised you a line of credit but that also had high interest rates, finding a debt consolidation company that offers low interest rates might be very appealing to you. However, the problem with some of the companies who advertise their ?incredibly low interest rates? is that they don?t always tell you everything about the debt consolidation services you?ll be getting. Quite often, these companies tack on hidden fees that other companies don?t. Your consolidation costs can end up much higher in the end if you choose to work with one of these companies. Before making a commitment to work with a company, you should always ask for a full disclosure of their services and their rates. That will allow you to compare rates with other companies so you can find the one that will serve your needs the best.

Requiring Upfront Payment

Under the Credit Repair Organizations Act debt consolidation companies are forbidden from requiring any payment from you until they have fulfilled their obligations to you. Many debt consolidation companies require initial deposits or other fees on their services before any work has even been done to eliminate your debt. You should avoid these companies.

Gathering Your Personal Information

Many fraudulent debt consolidation companies seek out as much information about you as they can before they even provide you with a quote for their services. Be very wary of sharing too much personal information with a company who is asking for it prior to signing a contract with them. The result could very well be that you end up having your identity stolen, which will end up placing you in a worse financial position.

Advising Against Credit Counseling

One of the ways to identify a debt consolidation scam is working with a customer service representative who advises you against seeking out credit counseling. They will advise you to abandon your diligence of keeping an eye on your credit score by not contacting the credit agencies with any questions or concerns. They may also go such extremes as to advise you to stop paying on your debts for the purpose of depositing money into a trust account to be used on your debts at a later time. They can be very persuasive in why you should do these things, and they back up their ideas with reasons that sound very good. However, you will probably end up losing a big sum of money before you realize what they?re up to.

Creating A New Identity

Many debt relief seekers have found themselves in a terrible situation at the hands of debt consolidation scams because their adviser told them they should create a new identity for themselves. They use the argument that your current identity is burdened with too much debt and you need to start all over again. This step is most certainly not necessary, nor is it an ethical solution.

While it?s true that being in debt can cause you a great deal of stress, entering into a relationship with a shady debt consolidation company will only add to that stress. Take some time and do some research on every company you consider working with. The Better Business Bureau is an excellent source of information that will provide you with the details about the company?s credibility. You should also find out if there have been any consumer complaints lodged against the company. Oftentimes, friends and family can be a great source of information for you.

Regardless of which company you choose, taking your time to find the right one who won?t scam you is worth your time. Debt consolidation can be a great tool for helping you get back on your feet, as long as you work with a credible company with a proven success rate.

This article was written by author and blogger Arthur Frischman. Arthur covers Debt Consolidation Reviews on StarReviews.com.

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Source: http://www.howimportantisyourfinance.com/2012/10/16/5-debt-consolidation-scams-to-watch-out-for/?utm_source=rss&utm_medium=rss&utm_campaign=5-debt-consolidation-scams-to-watch-out-for

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