Should I use a debt consolidation company?
With the economic times we are in; it seems that on a daily basis you are seeing more and more advertisements for debt consolidation. Whether it be through Television advertisements or ads on your favorite websites. That is great if you are in debt but you maybe wondering what is Debt consolidation and how does it work.
In the beginning I must give you a few words of counsel. If you do decide to use a debt consolidation company you will need to do some homework. Not all the companies out there have your best interest at heart. At the end of this article I will give you the information you need to avoid the scams.
Now to answer the beginning; what is debt consolidation? Debt consolidation in its simplest form is basically taking all of your debt and combining them into one monthly payment. How this is achieved varies by company. The largest perpetrated way of doing this is by having you ( the customer) take a home equity loan and paying all of your debts off from that plus their often not so fairly small fee. This is not necessarily bad; but with the way mortgages and credit is going today it is getting harder to gain these loans. Especially if you are already in debt then your credit may not be at it’s best. The next method that many companies use is to negotiate with your creditors to settle your debt a lower rate ( usually by manipulating you interest rate).
Usually they make money two times in these instances. First from you and second from the companies they “negotiate” with because most of the larger companies have contracts with the largest creditors to earn a commission on the debts they help collect. Sounds like a collection agency that you are paying to collect from you.
Now not all debt consolidators are out to rip you off. Many of the companies that you can get in touch with through your local consumer associations will have your best interest at heart. Additionally; many of these organization are either non-profits or not for profits. Additionally; you can go the route of doing it yourself. It is a little tedious but not overly difficult to accomplish. If you are reallystrapped for cash this may be the best way for you to go. As it will not cost you any additional money other than what you can negotiate for yourself.
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