Have you racked up a large amount on your credit cards? Are you carrying a huge balance on each of them? If you answered “Yes,” debt consolidation might be the perfect option for you. You might be wondering why, when you can wave off a large part of your balance through debt settlement, you would choose to consolidate your debts? That’s because debt settlements can damage your credit score and it may be very hard to get credit on reasonable terms once your report is updated as “paid as settled”. This harm to your credit score can be avoided with consolidation. Here are some debt consolidation tips that you can follow in order to make the entire procedure successful.
1. Check your credit report first
Knowing where your problem exists is the first step that you can take to solving it. Calculate the total amount of debt that you owe so that you know the exact amount that you may have to borrow on your debt consolidation loan.
2. Get in touch with a reputable debt consolidation firm
The next step that you need to take is to get in touch with a reputable debt consolidation firm so that they may not scam you into victimizing you and pushing you further towards the debt hole. Check whether or not the company is registered with the BBB and if the consumer feedback mentioned in their website is mostly positive.
3. Avoid predatory lenders
Getting help from the loan sharks to climb out of high interest debt is not at all a good idea. You must avoid all those debt consolidation lenders who charge hefty upfront fees before even reducing a portion of your debt burden. This practice is not in accordance with the FTC rules and you can complain about such lenders with the FTC.
4. Non-profit doesn’t always mean good service
You might think that a non-profit debt consolidation company means trustworthy services but this not really true. There are many for-profit consolidation companies that pose as non-profits in order to attract more client debtors. You can check the 501 (3) (c) certificate that has been given to them by the IRS to prove their non-profit status.
Just as debt settlements trash your credit score, debt consolidation can also hurt your score if you default on the payments that you’re supposed to make to the consolidation company. Therefore, it is your duty that you manage your personal finances so that you make the single monthly obligations on time.