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Debt Consolidation Considerations

By Mary Beth | April 20, 2007

Tax season is one of the few times a year when people are forced to take a hard look at their financial life. The 1040 pretty much sums up your finances for the last year and you may not have liked what you saw. Many people turn to debt consolidation companies to help them out of a bad financial situation. This may be a good option for some people but it is definitely not right for every situation. If you are considering hiring a debt management consultant, be sure to fully investigate the company as there are many scams out there. Many companies claim to be “non-profit”, and some are, but there are also a lot of people who are willing to take advantage of others in desperate situations.

Interview several agencies and when considering a debt counselor, be sure to ask the following questions:

• What services do you offer? Look for a company that offers a range of services, like budgeting and debt management classes. Be wary if they offer a Debt Management Plan (DMP) as your only option.
• Do you have a license to offer services?
• Are your counselors qualified? Are they accredited or certified by an outside organization?
• After tackling my immediate problems, will you help me develop a plan to avoid future issues?
• What is your compensation structure for employees? Do they earn more when I agree to extra services?
• Are services personalized? Your debt is different from everyone else’s, why should your debt management plan be the same?
• Do you have a privacy policy? Make sure that your information won’t be made vulnerable to identity theft.
• What are your fees? Is there a set-up or monthly charges? Get a written quote.
• Do you charge for information? Avoid companies that are unwilling to provide educational material at no cost.

DMPs are an extreme measure and they are not appropriate for everyone. You need to find a debt counselor who is willing to discuss other options with you. I’ll explore DMPs in a future post…

Topics: Credit, Scams |

5 Responses to “Debt Consolidation Considerations”

  1. Personal Finances, Saving a few bucks Got it? » Blog Archive » Carnival of Debt Reduction #84! Says:
    April 23rd, 2007 at 5:56 pm

    […] presents Debt Consolidation Considerations posted at BBB Consumer Education, saying, “This post details the warning signs of a […]

  2. Annette Says:
    April 26th, 2007 at 6:12 am

    Also, check out Debtor’s Anonymous. It a free service that supplies weekly support meetings and on-request counseling with ex-debtors. It’s an offshoot of A.A.

  3. Mary Beth Says:
    April 26th, 2007 at 8:15 am

    Thanks for the info, Annette! I hadn’t heard of D.A. before…I’ll have to check if we have one in our area.

  4. Debt management consultant - We offer you the services of a certified | Debt | Need Tip Says:
    September 30th, 2007 at 8:24 pm

    […] Educate Yourself (and Your Kids) About Internet Safety and Security … are considering hiring a debt management consultant, be sure to fully … … […]

  5. Carnival of Debt Reduction #84! » American Consumer News Says:
    June 26th, 2008 at 2:59 pm

    […] presents Debt Consolidation Considerations posted at BBB Consumer Education, saying, “This post details the warning signs of a […]

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