If your debt feels like it's weighing you down, and you're constantly stressed out about how much money you owe in loans or on your credit card, it's natural to want to run to debt consolidation. It can help you save on interest, and you'll have just one loan making it easier to stick to a realistic short-term plan to get out of debt. But entering into a debt consolidation agreement is not a decision to take lightly.
After all, not all debt consolidation companies are all created equal, and, most of the time, a "quick fix" to get you out of debt is simply too good to be true. You'll end up in a worse financial situation than you were in before if your debt ends up in the wrong hands. If you're seriously considering turning to a debt consolidation company, don't get tricked into costly scams.
To get started, you need to understand exactly what debt consolidation means for you and your debt or loans. Before you take a look at your options for debt consolidation companies, make sure you clarify what exactly you're looking for. Terms like "debt management" or "debt settlement" are NOT the same as "debt consolidation."
You'll find a lot of companies advertise as though debt consolidation, debt management, and debt settlement are all the same thing. True, they are all ways to refinance your debt, but they are VERY different in how they affect your credit and long-term finances. Debt management and debt settlement are extremely risky and have debilitating effects on your credit score.
Debt consolidation has its own set of risks, but you're essentially still in control. It's up to you to make payments every month to avoid penalties and an increase in interest rate. Once you understand what debt consolidation really means, you can move forward to consider how you can consolidate your debt.
There are many different ways to pursue debt consolidation, and many of them don't require a debt consolidation company. If you have a good credit score, you might not need help from a debt consolidation company. To read more about these options, visit our previous post, "Debt Consolidation Programs."
If your credit score is below 660, "do it yourself" debt consolidation won't be an option for you, and you'll need to begin a serious search for reputable debt consolidation companies. Below, we'll explain how to avoid scams and ensure that you move forward with a trustworthy debt consolidation company that offers reasonable terms.
Finding a reputable debt consolidation company is easier said than done. Creative marketing and advertising can easily misinterpret the true intentions for debt consolidation companies. There are plenty of predatory companies out there looking to take advantage of people in vulnerable and desperate situations. ReadyForZero has vetted all the partners in our debt consolidation tool, so you can rely on using our trusted partners.
However, there are a few things you can also do to quickly determine whether any other companies are credible. When you have a list of debt consolidation companies that seem like good options, start a thorough search online by following these steps.
Once you’ve identified the list of companies that seem legitimate based on your online research, it’s time to go and get to know the companies firsthand. Interacting with their representatives will reveal a lot about the legitimacy and reliability of a company and how they handle business. It’s difficult to guarantee that a company is reputable, but you can easily avoid major scams by keeping an eye out for these red flags.
There’s no point in entering into debt consolidation if it just makes you go into further debt. The decision of whether debt consolidation works for you really comes down to the numbers. Crunch your numbers to determine whether it makes financial sense for you to turn to debt consolidation. Any debt consolidation company is going to charge you a fee, so you need to consider what impact these fees will have on your finances. Here are the numbers to pay attention to:
Add it all up!
If your new debt consolidation loan will cost you more money in the long run, it doesn't make sense to enter into a debt consolidation agreement. You might be tempted because your monthly payments might be lower, but you should only resort to it if you really can't pay your bills every month. Otherwise, you're just paying even more money in the long run. For more consideration on whether or not you should consolidate your debt, check out our previous post, "Is Debt Consolidation A Good Idea?"
Finding a reputable debt consolidation company isn’t the easiest process, but it is an incredibly important step if you’re thinking about debt consolidation as a path toward living debt-free with financial freedom. Choosing a reputable debt consolidation company can help you save and get out of debt faster, but trusting the wrong company could potentially lead you down a disastrous path with no turning back. Don’t let a sales pitch or smart marketing dissuade you from taking the time to thoroughly research all your options.