How to Avoid Low Interest Debt Consolidation Loan Scams

They’re out there … in droves …

On the Internet and in the real world: Scammers preying on people who are looking for a low interest debt consolidation loan.

If you are interested in finding a low interest debt consolidation loan that will aid you in your overall financial management plans, you necessarily need to be very careful that you do not fall victim to some sort of low interest debt consolidation loan scam.

Through this article, you will be provided with some cautionary tips to keep in mind when it comes to seeking a reliable, reputable and trustworthy low interest debt consolidation loan lender. With these pointers, you will be in a better position of making certain that you avoid scams and shams in your search for a low interest debt consolidation loan.

If It’s Too Good To Be True … You Know the Rest …

One factor that you absolutely must keep in mind when it comes to seeking a low interest debt consolidation loan is the age old saying that if it sounds too good to be true, it probably is. Time and time again you will come across advertisements for low interest debt consolidation loan options that make some pretty tremendous claims. In fact, in regard to these types of loans, you will find that there are hidden fees and other costs that end up making these loans far less attractive in reality that they might appear to be in the advertisements.

Get References and Recommendations

In order to make certain that you end up dealing with reliable, reputable and trustworthy low interest debt consolidation loan lenders, you should take the time to obtain references and recommendations. For example, you will want to obtain information by way of word of mouth. Even in this high tech age, word of mouth remains a great way of obtaining helpful information about your low interest debt consolidation loan options and about different low interest debt consolidation loan lenders.

By visiting with your friends, family members and other colleagues, you will be in a better position to determine which low interest debt consolidation loan lenders are reputable … and which low interest debt consolidation loan lenders are not.

Stick with a Low Interest Debt Consolidation Loan Lender with a Track Record

In seeking a low interest debt consolidation loan lender with which you can do business, you also will be best served by ensuring that you engage a low interest debt consolidation loan lender that has an established track record. You will want to connect with a low interest debt consolidation loan lender that has provided appropriate services to other consumers in the past, a low interest debt consolidation loan lender that has had the chance and the time to establish and build a solid reputation for good service, reliability and trustworthiness.

In the end, by following the suggestions and pointers outlined in this article, you will be in a better position of ensuring that you do not end up involved in some sort low interest debt consolidation loan scam.

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Facts - What Debt Settlement Companies Don't Tell You

If you're thinking about using a debt consolidation or debt settlement service to help you get out of debt faster and save money on your monthly payments, make sure you do your homework before choosing a company. There are definitely shams and scams out there.

First let me say that debt consolidation is *not* the same as debt settlement/negotiation, which most people don't realize.

Debt settlement companies charge hundreds of dollars as an initial "admin fee" to set up your account, plus a monthly service fee. The fees vary depending on the company and the amount of your debts.

Such companies take your money every month, but don't make monthly payments to your creditors! Instead, they put it in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there's enough in your account to pay a creditor in full.

That can take *years* depending on the amount of debt you have with each creditor. Meanwhile, you can be sued by your creditors and your wages can be garnished! (Or just don't make payments to your creditors. You'll end up in the same spot without paying someone to help you get there!)

Settlement companies don't ask your creditors to stop all interest, late fees and overlimit fees from accruing. That means while the negotiations are ongoing, your bills will continue to grow! So if you're sued and a judgement is brought against you, you'll owe more money than before!

And shoddy companies, which there are alot of, don't tell you *any* of this up front. I call it "getting permission by ommission" because they simply don't tell you how their program works *before* you sign an agreement with them. Or after, for that matter. But if you ask the right questions, eventually you'll figure it out. (Or when the crap hits the fan. Whichever comes first.)

Let me give you an example of how debt settlement works.

Let's say you have $20,000 in unsecured credit card debt. You owe $10,000 to one credit card company, $6,000 to another and $4,000 to a third. You agree to a 5 year plan where you pay $250 a month to the settlement company. (After all, $250 a month for 60 months is only $15,000, so you're saving $5,000 and you'll be debt-free in 5 years, right?)

The admin fee will cost you $750. Your first 3 monthly payments go towards that and nothing gets put into your trust account until your 4th month.

The settlement company keeps $50 of your $250 payment each month for the service fee. That means $200 a month is being added to your trust account.

Most debt settlement companies claim to be able to negotiate your debt for about 50% of what you owe. So let's use the lowest credit card debt as an example.

If you owe $4,000 and your creditor agrees to accept $2,000 as payment in full, it will take 10 months at $200 per month to have enough in your trust account to pay off just that one credit card.

But remember, your first 3 payments to the settlement company only paid the admin fee. That means your first credit card settlement is 14 months *after* you started sending them money.

So what's the problem? It's simple. Your creditor won't agree to accept half of your actual debt unless, or until, it can be paid in full. Otherwise, you're expected to make your normal monthly payments.

Since you don't have $2,000 in your trust account, and you won't have it until more than a year after you stopped paying your creditor directly, they'll probably take you to court and request that your wages be garnished long before you have that $2,000 built up.

And what about your other creditors? Well, they'll be waiting even longer to get their money from the settlement company. The $6,000 debt will take 15 *more* months to pay off, assuming your creditor waits that long and agrees to 50%. And that $10,000 bill? You do the math.

On the other hand, if you signed up for a 3 year plan with the settlement company, your debts would be paid off sooner. But, the question is, will your creditors wait that long? Probably not.

The facts are, you can negotiate with your creditors yourself. Most will agree to take a smaller monthly payment from you and stop all interest and fees from accruing. And, of course, you'll save thousands of dollars in fees to a settlement company.

Before signing up for any service, please be sure you check out the company thoroughly. And don't let the words "non-profit" fool you either. Alot of debt settlement companies claim to be non-profit.

Going back to the example above, if you pay them $15,000 over a 5 year time frame and they settle your debts at half of what you owed, they'll make $5,000 from you. I'd call that a profit, especially since they might not have actually helped you in any way.

Most companies will allow you to cancel your account and get a refund of what you've paid, less the non-refundable admin fee and the monthly service fees. If you feel you've been mislead about their program, don't hesitate to argue til the cows come home. File a complaint with the Better Business Bureau or hire an attorney if you feel you're getting nowhere.

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