Carrying debt with you for a long time can cause great stress. It limits you when it comes to making financial decisions and this certainly doesn’t help you in the long term. No matter what you are trying to do, you will feel like your hands are tied and like you have no options available.
You may have tried to repay your debt, but felt that it was simply impossible. Then, when you were looking through your options, someone mentioned debt consolidation. Now, this kind of thing can and will help you repay your debt, but don’t get hyped up right away.
Nothing is as simple as it seems and, if you are really considering hiring the services of a debt consolidation business, you will have to do a lot of research to understand how this concept works. You will have to find a trustworthy and honest business that will not lead you into an even bigger abyss than you are already in. A lot of people say that they’ve had bad experiences with debt consolidation companies, but this is only because they haven’t worked with those that could be trusted.
How does debt consolidation work?
To put it bluntly, debt consolidation companies pay off your debt for you, but of course, they don’t do it for free, as they want to get something out of this whole deal as well. There are the three types of businesses in this field:
- Debt settlement companies
- Debt management companies
- Debt consolidation companies
For the sake of this article, I will only explain debt consolidation. A debt consolidation business will buy off your whole debt and obligate you to make a payment to that business. This option gives you the ability to pay lower interest rates than your current ones and it will make your life easier by having to make a single monthly payment.
Most common mistake you should avoid
All three of these services are quite different on paper, but once you start looking for a debt consolidation business, you will soon realize how all of these three get mixed together. What I’m trying to say is that they seem quite similar, but there are fundamental differences to them, and if you don’t choose the right one, you might get into even bigger financial issues then you were in before. For example, if you search for a debt consolidation businesses, I guarantee that most results will also include debt management businesses and debt settlement businesses.
Why is this so important? Simply because debt management and debt settlement can carry a lot of risks and ultimately lead to devastating results that will destroy your finances. Still, this doesn’t mean that there is no risk with debt consolidation, but if you are consolidating credit card debt it means that your debt will be bought off by a third party, which you will have to make payments to under different circumstances.
The point is to basically change the way you pay off your debt, so that the whole thing becomes more convenient, but the risk is still there and it’s essential to make regular payments in order to avoid an additional increase in interest rates and penalties.
Important things to consider when choosing a debt consolidation business
The bad news is that there is no way for finding a reliable debt consolidation company quick and easy. The good news is that there are reliable organizations that will help you with your problem in a most professional and honest way. There are clear indicators that can help you determine whether or not a certain business is credible.
Run a checkup at The Better Business Bureau
If you have searched for some time and found some debt consolidation businesses that looks solid to you, run their names at The Better Business Bureau (BBB) website for further research. Here, you will see which companies are rated, which aren’t, and which have bad grades. For those companies that aren’t rated, I definitively suggest avoiding them, as well as those that have grades lower than B. Those that have Bs or As are your options. See what feedback the consumers gave them and check whether they had some legal issues.
Avoid companies that are too aggressive
Getting into another loan is an important decision that requires a lot of thinking and planning. This is why it is only natural that you take your time when finding a loan that best suits your needs. If a business starts pressuring you into choosing them from the moment you contact them, I suggest not using their services. They clearly only want to make a sale and they don’t care about your interests.
A company that shows a lot of interest for your problems and wants to listen to you explain all the circumstances of your current debt is the one that will look to make you a good deal. It is important to satisfy the terms for both parties.
They say everything will be fixed quickly
Like I’ve said a moment ago, don’t go with those hasty businesses that promise it will be all over in a matter of weeks. Getting out of debt properly is a process that cannot happen overnight, and any business that assures you that it will be painless and quick is lying straight to your face.
Check if they’re registered
There are various reasons why you should never work with a business that is not registered. A registered business cares about its reputation and they will always look to maintain their credibility. Furthermore, in case you get scammed, you will find it easier to pursue them legally. If a company is registered, see what it has and the feedback that was given. Again, make sure that you check if the company is registered.
In the end, it all comes down to numbers. Like I’ve said, no debt consolidation business will give you their services for free and they will charge you a certain fee. See what your bottom line is and consider the flexibility of the new loan and see if you can make it happen. Of course, you will have to make an effort to organize yourself, stick to your budget tightly, and cut down on unnecessary expenses in order to succeed.