Jumat, 16 Juli 2010

The pros and cons of debt consolidation




When you enroll online to obtain the relief services, the company may offer you a consolidation program. They may also pass on your information to a third party service provider if they are debt consolidation leads generation company.




Pros of debt consolidation




A consolidation program involves combining all your bill payments into one. It helps you pay all your creditors on time. It offers the following benefits:




  • No collection calls: The debt consolidation company representative communicate with the creditors on your behalf and prevent you from getting repeated collection calls.


  • A single lower monthly bill payment: The consolidation company representative negotiates with your creditors to lower the interest rate on your bills and also eliminate the late fees and over limit charges. You have to make only one monthly payment to the consolidation company. The company will disburse the payment on time to all your creditors.



  • Improve your credit score: Late bill payments get listed as a negative item on your credit report and lower your credit score. As soon as you start paying your creditors on time with the help of the consolidation company, your credit score starts improving.



Cons of debt consolidation



It’s true that by consolidating your multiple bills you can become debt free faster, but if you do not choose the right consolidation company, you may also be scammed. You can be defrauded in the following ways:



  • High upfront fees: The most common scam is to charge you high upfront fees. The companies may promise you to refund it later but only a few of them will keep their words.


  • Do not pay all your creditors: Scammers may defraud you by not distributing the monthly payments on time among all your creditors.

When you opt for a program offered by a consolidation company, you must verify if it has proper accreditations and may also check its BBB ratings. If the company you have approached turns out to be a debt consolidation leads generation company and they refer you to a third party service provider, then also you must check the accreditations and company reliability.


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