6 Effective Tips To Protect Yourself From Debt Consolidation Scams

This is a guest post by Willie Rhoades. If you want to guest post on this blog, check out the guidelines here.

“Get rid of your debt quickly! Call us now to get your loan approved!”? Advertisements by debt consolidation companies like these have become as common as chocolate ads. If you are already under heavy debt and large monthly payments are eating up a huge chunk of your income, the ad may seem welcome. It may appear as a panacea to your broken financial backbone.


In spite of all the wonderful claims made by these companies, debt consolidation isn’t a panacea. But some companies want to keep this truth from you and lure you into their trap. Is there a way to differentiate legitimate deals from the bogus ones? Here are a few tips to help you stay safe from such scammers.

Usual tricks used by scammers

Mostly, the cons are simple enough to be recognized, but your debt-laden eyes fail to identify them. When you call the companies (or they call you), they deliver a pretty interesting pitch that touches your fears and emotions. Soon they ask for an upfront fee before processing the loan. Once you pay their “advance fee”, you never get the loan.

Some other fraudulent companies use a different tact. They claim to be non-profits, but they secretly keep moving your money to for-profit businesses. Looking at their delusory names, many unsuspecting people easily trust them. The Federal Trade Commission (FTC) in USA has exposed several such scammers and charged them with hefty fees and penalties.

There are others who can’t exactly be called scammers. They don’t initially reveal anything about their immense fee that could push your total debt higher. Be warned if a company charges:

  • A part of the money you save through debt consolidation (it may be up to 25%).
  • Sign up fees.
  • A part of your total debt amount (it can shoot up to 20%).
  • Monthly service charges.

6 Tips for protection against these scams

1. Do your research

Getting a little investigation done before contacting any debt consolidation company can help avoiding major blunders. Do a Google search; type the company’s name with review. For example, “XYZ Debt Solutions review”. This way you’ll get to know what other customers have to say about the company.

Visit their website and have a look at their credentials. Legitimate companies boast of their credentials, testimonials, and they are members of various national and international associations. Additionally, call your creditors to know if they’ll agree to work with the company.

2. Compare fees

Yes, put the monthly payments aside for a while. Since creditors offer the same rate to every company, there shouldn’t be any big difference in the rates of debt consolidation companies. In case you are offered a lower monthly payment, it should be because the loan period has been extended, and you’ll end up paying more money in the long run.

3. Watch out for the extra fees

Some unscrupulous debt consolidation companies may bill you for analysis or a quote. Worse, I have met many people who complain to have been charged large sum of unexpected fees. And such hidden fees popped-up months, or years after they consolidated their debt.

4. Ensure that the proposal has been accepted

You should begin making payments to the finance company only after their proposal plan has been accepted by the creditors. Do not agree to pay a fee until the service has been performed. Of course, you should review the proposal plan as well.

5. Keep a vigilant eye on facts

Refuse to entertain any company that persuades you into a plan or guarantees any favor without looking into your financial details or specific needs. Many fraudulent companies do not reveal all the facts to you and keep you blindfolded over the details. On the other hand, legitimate ones will take interest in discussing about your current debts before making any offer.

6. Finally, a tip that is often overlooked: never ever make a deal without reading the fine print!

Now that you know of the various ways in which debt consolidation companies try to scam unsuspecting customers, are you frightened or feeling confident? I am curious to know all about it, so please share your thoughts with me.

Willie Rhoades is a finance analyst who enjoys writing about debt consolidation, debt management and other personal finance related topics on his website https://www.debtconsolidationloans.uk.com/. He has written many articles over the years and enjoys authoring reports offering money saving tips that can be easily actioned.

1 thought on “6 Effective Tips To Protect Yourself From Debt Consolidation Scams”

  1. Great post! The tip most people miss out is probably the most important one… “never ever make a deal without reading the fine print!”

    So many people are getting ripped off by the small print. Debt Consolidation loans are a great solution for people with multiple debts. But that doesn’t mean that there aren’t any unscrupulous lenders trying to rip-off people already struggling with debt. Read the small print and us trusted lenders!

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