Financial Planning

How would you know, whether the company you opted for a debt consolidation loan is legitimate and trustworthy or not? And more importantly, before you search for debt consolidation loan, find out if you should consolidate debt or not. Here are some indicators to select a good debt consolidation firm or loan:

1. Firstly, check the kind of advertisement that they post. Usually, a fraud company would advertise in Classifieds, instead of the regular display advertising. Also be wary of cheap ads on local cable and radio stations.
2. If you come across a debt consolidation company that states that they can help you eradicate your debts within a few days, it is a sure sign of a scam or false statement. Watch out for companies that make outrageous promises like dropping your interest rates to zero percent. Or those who charge a huge amount of money as upfront fees (They call it ‘client assessment fee’), just to look at your papers.
3. While choosing a debt management firm, check the company’s credentials with Better Business Bureau. It is recommended to seek advice from authorized credit counselors.
4. If you find a debt consolidation firm which lets you consolidate the debts without collateral, read the offer document carefully before signing up.
5. Watch out for any debt consolidation firms offering loans with lower interest rate but high amount of processing charges and other fees. The loan may have lower interest rate then others, however, the fees could make it more costly in the long run. Then again, avoid debt consolidation loans offering very low repayments. Low repayments mean it will take more time to repay your debts completely and you will pay much more as interest.
6. If your debt is at a fixed interest rate, do not go for a debt consolidation loan with a variable rate of interest.
7. Ask for a free quote from the company. This will give you an idea of the time it will take to repay your debts.
8. One of the popular choices for the consumers who need debt consolidation loans is to go through non profit agencies. However, before going for such non profit agencies, you should know that although the services provided by them are often free, you might have to pay a fee or provide monthly donations to the agency. These monthly donations keep the non profit agencies running.
9. There are certain multi level schemes of debt consolidation in some companies. Be aware, that most multilevel schemes offer very limited options to the consumer, while charging very high commissions. You should treat a multilevel program like all other regular options.

Characteristics of a reputable debt consolidation firm:

1. A good debt consolidation firm will never offer you a debt consolidation loan, unless they see and verify your credit history. It would never request any personal information such as your credit card numbers, social security numbers or bank account numbers on phone. A good debt consolidation firm would never deliver documents in an overnight courier service.
2. A good debt consolidation firm, would provide you with a lot of benefits like, free assistance regarding debt repayments, creating a monthly budget, a personal debt management plan etc. This will improve your overall credit scores and also lower your payments considerably.
3. A good debt consolidation firm usually charges a reasonable application fee. Sometimes, they waive that too. They offer you the terms of loan and requires your approval.

There are numerous legitimate companies that can offer you the best debt consolidation loan according to your requirements and circumstances. All you need to do is, be knowledgeable about the right kind of companies. If you have the right information, your experience of consolidating your debts will be a good one.