Debt consolidation might be the right choice for you if you are juggling several loans at once and wish to pay them off as fast as possible. In this process, not only can you get all your loans rolled into a single bank transfer account, but you also receive a lower annual percentage rate.
Your task, then, is to pay off that one single debt through EMI instead of juggling multiple debts at once. However, I always advise that you exercise caution while approaching lenders for a debt consolidation option. Where you source your loan is of utmost importance because there are several scammers out there preying on people’s desperations.
So, how can you flag illegitimate or shady debt consolidation companies? I will guide you through some of the main signs to look for in lenders.
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They must be clear in their communications.
The first thing you should look out for in debt consolidation companies is their level of transparency. Any good lender should be able to explain their procedures to you with clarity and detail. They should not hold back any valuable information. Further, their main aim should be to help you get out of debt in a realistic way. They should not make any false promises to you in this regard.
For instance, many companies posing as debt consolidation companies mention that they will negotiate with your creditors for a lower interest rate. That is not an act of consolidation but settlement. Debt settlement companies tend to be for-profit and tend to be populated with scams. Further, never heed any phone calls, emails, or other out-of-the-blue approaches; they are highly likely to be frauds as no legitimate company will ever reach out to people unsolicited.
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They should be accredited.
Always check for certifications when you approach a lender. With banks, it is easier to tell if you have contacted their branch. However, for non-banking financial institutions, you should thoroughly check their affiliations.
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They should not ask for fees upfront.
No legitimate debt consolidation company will ask you to pay organizational or maintenance fees before they provide you with their services. If a company is asking you to make any down payments in cash or make an abrupt transaction, promising their service thereafter, you should walk away from them immediately. They are highly likely to be debt settlers posing as debt consolidators.
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They should set realistic goals and guarantees
The main task of debt consolidation companies is to work with your ability to repay your loans. In doing so, they must be attentive to your eligibility requirements and creditworthiness. Repeating takes time, and no credit score can be improved overnight. If you find any companies making such bold claims, they are likely planning to scam you.
What are some alarms you should look out for in debt consolidation companies?
- They use aggressive, high-pressure sales strategies to coerce your decision.
- They ask for unrelated personal information, such as other bank account details and social security numbers, even before you’ve made the application.
- They don’t explain their system and process.
- They ask you to stop paying your debt to your creditors.
- They propose new or unheard-of government schemes.
Wrapping Up
The arena of debt consolidation can be filled with people with ulterior motives. This is especially the case with debt settlement companies who are posing as debt consolidators. That’s why I advise you to perform your due diligence before approaching any lender and never settle for the first one you find.
Scams can be dangerous and affect your debt consolidation goals to a great extent. So, be watchful with all the points I discussed here today.
