Debt Consolidation Programs to Avoid

Are you debts so high that you can’t see a way out? Are you considering a debt consolidation program? That may be wise, but not all of these programs are legitimate. Some are scams. They will take your money and do nothing to help you get out of debt. Even if a company claims it is a non-profit debt consolidation company, check it out. These can also be scams. You may even give them some money and see no reduction in your debt.

Non-profit companies, even legitimate ones, have to have funds to operate. They do not provide their services out of the goodness of their heart. Their only income is from their customers – you. Unethical not-for-profit debt consolidation companies may ask you for a “voluntary contribution” which they say they will use to pay down your debts. But none of it goes to your debtors. They’ll take out “operating expenses” and have nothing left to pay your creditors. How can they do that, you may wonder. As it turns out, non-profit companies can keep their status if they are providing a service and are operating in the public’s interest. These companies may use telemarketers who use high pressure tactics to get you to enter their program. Their profits are in the millions of dollars, most going to high paid executives.

These companies may claim they can get you a loan at a low interest rate which will be enough to pay off all your debts. Then, they say, all you have to do is pay back one loan where the total you owe each month will be lower than what you are paying now. Think about it! Your credit score couldn’t be much lower. Banks and lending institutions will know you have trouble paying off your debts. What legitimate lender would give you a loan? It will not be a legitimate company. Who’s left? The unscrupulous ones. They may, in fact, give you a loan with a low interest rate, but they won’t tell you that that rate is only for a short time. Then the rate goes up. Way up. Maybe even to 22%.

They may also try to convince you that you can make a “lump sum settlement” where you offer your creditor a significant amount of money, but less than what you owe. They say that creditors are willing to accept the lump sum and write off the rest because it is better than you going bankrupt and paying them nothing. They will tell you to stop paying on all your debts, take that money and put it into a special savings account which they will set up for you. Here are they problems with this. First of all, they take hefty fees out of the money you deposit. And second, what do you think you debtors are going to do if you stop paying them altogether? Smile and say, “That’s OK, we understand.” No, they are going to turn your account over to a collection agency. Think of the harassing phone calls you’ll get. And you think you credit score is low now. It’ll be even lower if you stop paying your bills.

Remember the old adage: If it sounds too good to be true, it is.