Understanding How Debt Consolidation Companies Work

March 26th, 2014 | Author:

[O]nce you have decided debt consolidation through a company is the path to take, you need to find out which one is best for you and is reputable and honest. The term “buyer beware” applies here too! Be sure you have done your homework on your debt and what you can afford to pay each month before you get started.

Check out the agencies in your area first. Research the Better Business Bureau for their membership or complaints filed on them. Do they have a good reputation and are they licensed? Remember, each state might require different requirements for operation. You do not want to complicate your situation with the wrong agency.

Not All Agencies are the Same

Not all debt consolidation companies are the same nor do they all change the same fees for their services so it is vital you find the one which works best for you. If ones in your area do not meet your needs or do not appear credible, broaden your search.

If you feel rushed into making an arrangement with a company, back off and think about it. Even ones which call themselves “non-profit” usually charge fees for their services.

How They Work

The company you choose will make monthly payment arrangement with your creditors, which will stop the collection calls. This one step can make you feel less stressed.

The cost will vary. Some companies take a percentage of each of your payments, some take the first and second payments for “administration costs”, and others add a percent on the total debt. There is no hard and fast answer to the costs but this will give you an idea of what to initially expect. Be sure you are aware of the fine print, i.e., late fees, administration costs, handling fees, etc. All of this can add up rapidly and cause you to regret your choice. Read the fine print.

Once you have decided on a company and have an agreement, stick to it! Consolidating your debts is a viable option for people and can bring a great deal of relief. Once you have done so, be sure not to live above your means and work to keep your spending within limits. Pay more than the required amount when you can and you will reach your goal of having your debts paid.

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