Debt consolidation helps you to pay off all your existing debts with a new loan that comes with a lower rate of interest and single payment per month. Are you contemplating a debt consolidation loan for your existing debts? That’s good, but you should be careful to settle with a reliable debt consolidation firm as not all such firms around can assure you complete peace of mind. Here are the tips to help you choose a good debt consolidation company.
Market study
You should not settle with the first debt consolidation company you come across. Rather, you must carry out a comparative study on 5-6 potential names before the final sign up. You have to check their BBB ratings, look for pending lawsuits against them (if any) and go through customer comments. The one you take to should be free from lawsuits, should hold a high BBB A+ rating and must be backed by happy clientele. Always settle with companies working for at least 7 years in the industry.
It’s smarter to take to non-profit agency
There are non-profit debt consolidation agencies that operate on funding and are not profit-centered. Thus, they charge much lower rates compared to the for-profit companies. Nevertheless, you should know that a lot of companies claiming to be non-profit are scams these days. Thus, before you settle with a non-profit debt consolidation firm, you must check their nonprofit status. A true non-profit company won’t hesitate to show you its 501(c)(3) certificate.
The non-profit companies would be especially helpful if you have got a bad credit. The for-profit companies tend to charge spiked interest rates for candidates with poor credit, but non-profit companies being not-so-profit-centric will be sympathetic towards your situation and charge less.
Initial consultation
The best debt consolidation companies always offer an initial consultation to clients before devising the loan option. The consultation involves a complete review of your financial situation by an expert counselor to decide whether debt consolidation is necessary or suitable for you. In some cases, some smart budget rearrangements might help one to pay off the existing debts on his own without going for debt consolidation. If your chosen company is too pushy and kind of coerces you to sign up with its program, it might not be trustworthy.
No upfront fee
Beware of those debt consolidation firms that ask for upfront fees. The debt consolidation companies would be making money off your interest on the new loan and hence, won’t require an upfront fee. If your chosen debt consolidation firm is asking for an upfront fee, don’t hesitate to look elsewhere.
Do your math
You must do your math before you choose a debt consolidation plan. A debt consolidation company assures lower interest rates, but you should keep in mind the term as well. If the term is way longer than those of your existing loans, you will eventually end up paying more. Thus, always compare the interest amount and repayment term of your debt consolidation loan with the interest amount and repayment term of your existing debts- prior to signing up for a debt consolidation program.
