Debt negotiation or settlement is designed to reduce the amount owed by negotiating with creditors, while debt elimination offers typically are scams that do not work. A legitimate debt consolidation company will help you roll all your debts into one account to make payments easier and more manageable.
Step 1
Check with the Better Business Bureau's Reliability Reports that are available free online. Type in the name of a credit consolidation company you are considering using. The reports can tell you if there have been any complaints lodged against the company and if they are registered with the Better Business Bureau, as well as other information about the time they've been in business and how many employees they have.
Step 2
Start with a credit counseling service. Because of the high fees associated with debt consolidation, it may behoove you to see if there may be other options to help you pay down your debt. Many counseling services then can refer you to a good debt consolidation company. Nonprofit credit counseling services often offer consolidation services at reduced fees that are provided contingent on continued counseling.
Step 3
Find a credit counselor that offers in-person services, advise financial counselors at the Federal Trade Commission (FTC). The debt consolidation and settlement industry is a growing arena and attracts many unscrupulous scammers. You can better protect yourself and your interests by seeing first-hand if the credit consolidation company is a legitimate business.
Step 4
Read all the documents offered by the debt consolidation company so that you'll be aware of all the fees they charge for the services. Consider the interest rates that you'll be charged on your new loan and check out the final payments to make sure that you aren't spending more money to pay off your bills than is worth it. You may be better off sticking to a budget.
Tips and Warnings
- Go to your bank and talk to a lender about getting a second mortgage or equity line of credit to pay off all your bills. While the loan carries its own set of closing costs and interest rates, you can consolidate your own bills and manage the one payment yourself instead of paying fees to a debt consolidation firm.
- Beware of companies that ask for money upfront or pressure you to make donations to their "non-profit" organization, warn counselors at the FTC.
Things You'll Need
- Better Business Bureau Reliability Report
- Credit counselor
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