Though estimates vary, it's pretty clear that many American consumers are mired in debt, paying huge chunks of their monthly income to banks, credit card companies, and lenders of every sort. Federal Reserve statistics, for example, indicate that the average American household has at least three credit cards and owes about $7,000 in credit card debt. Some families, of course, have credit card balances far exceeding that amount, and many are shouldering additional burdens for houses and cars they can't afford.
Bogus debt consolidation companies target such households. Why? Because those families are often desperate. Collection agencies are hounding them. Mortgage companies are threatening foreclosure. The repo guy is standing in the driveway, eyeing that shiny vehicle purchased on credit.
The good news? Legitimate credit counseling organizations exist. Using their services, many families have been able to consolidate loans, negotiate with creditors, and work toward financial solvency. But there's no magic pill. Getting out of debt requires discipline. Like sticking to a diet, it involves sacrifice - and time.
If you're tempted to call that number on your television screen or sign a contract with a sales representative offering debt consolidation services, watch out for these red flags:
- Pressure to sign now. Whether it's a lottery con or prescription drug fraud, rip-off artists want the money now. So they often require up-front fees or try to bully their way into your bank account. Don't fall for it. In fact, if a for-profit company sells debt consolidation services over the telephone and charges a fee before actually settling or reducing your debt, that company may be breaking the law. In addition, such businesses must disclose key information so you can make an informed evaluation. If a representative pressures you to sign an agreement quickly, walk away.
- Unreasonable guarantees. If the company claims it can fix your debt problems without knowing anything about your personal finances, hold on to your wallet. A legitimate firm will take whatever time is necessary to understand your assets, your income, and your liabilities before developing a debt consolidation plan. A salesman who pledges instant elimination of your debt or overnight improvement in your credit score won't deliver.
With careful research, discipline, and time, many seemingly impossible debt problems can be solved. If you need help, give us a call.