Don't throw your money away!
It seems that almost every time you turn on the television or the radio, you are inundated with ads from debt management or consolidation companies. They promise that they can help you avoid bankruptcy and silence calls from creditors. With so many people mired in debt, coupled with a sluggish economy that is leaving more and more folks without jobs, there definitely is a market for these services. Many individuals who are desperate and looking for a way to hold on to what they have and improve their financial situations are turning to such companies as a way to get back on track.
However, what some people are finding is that they are ending up worse off than when they began after using such companies. This is because some debt management companies are not actually looking out for their client’s best interest but instead are looking to fleece them by charging large administrative fees. Other companies have no intention of doing what they promise. Instead, they are looking to get wealthy on the backs of people who are willing to hand over their hard earned money in a last ditch effort to correct their financial woes. These types of establishments often leave their members worse off than when they walked through the door. Below, we will take a look at which types of debt management companies you should avoid.
a. Avoid companies that prove to be unreliable: Refuse to do business with companies that don’t do what they say they will. This can be difficult to gage at first, so you need to be on the lookout for the little things. Are they hard to reach? Do they refuse to return your phone calls and/or emails? These are often tell-tell signs that a company is unprofessional and perhaps even unethical. If they are ripping people off, they won’t want to answer their phones or any other type of correspondence. Instead, they become masters of avoidance. There is always an excuse for why they aren’t able to do what they promised they would. Do not do business with these companies and if you have already, do whatever you can to sever the relationship.
b. Avoid companies that charge high fees: There are many non-profit debt management companies that will work for you free of charge or for only a small monthly fee. In some cases, the fee will be voluntary and you can opt out of paying it if you wish. A payment of between $15-$25 per month is about the norm. Also, watch out for companies that ask for large amounts of money upfront. Often times, these will be disguised as “administrative fees”. Even though these are not unheard of in the industry, you shouldn’t expect to pay more than $50. Any company that is attempting to charge you significantly more than that should not get your business. You can find many debt management companies which will provide the same services for far more affordable rates.
Some companies will attempt to get you to pay hefty fees by promising that they will be able to fix your credit or get you much lower interest rates. Remember, it doesn’t matter how good it sounds, a debt management company cannot guarantee that they can get you a certain interest rate or wipe your credit file clean. Sure, some may have established relationships with certain creditors and they will likely be able to get your interest rates reduced but credit card companies do not have to offer lower rates (there’s simply no way to force them). Keep this in mind when you meet with a fast-talking debt management company representative who seems to be promising you the world. The truth is that non-profit companies can provide you with the same services without the excessive fees.
c. Avoid companies with a poor reputation: This one should be obvious. However, you would be surprised at how many people do not check the backgrounds of the debt management companies that they are considering working with. This is a big mistake and can end up costing you big-time in the long run. It only takes a little effort and some digging to determine if a company is worth doing business with or should be avoided. The Better Business Bureau is a good place to begin. You will need some basic information about the company in order to investigate. The name of the company as well as the city and state where their home offices are based should be enough. You may want to check with the attorney general’s office and also perform a Google search. Often times, you will find the rants of people who have been ripped off by a certain company online. If you repeatedly find that people have had bad experiences with a particular organization, it is best to look elsewhere.
