Debt Consolidation Traps
People in debt are easily tempted by offers to “pay off your high-interest credit card with a new, lower-interest loan.”
However, debt consolidation is extremely vulnerable to scammers.
Here are nine ways to tell if the offer is a scam:
1. The agency asks for an upfront payment
A true financial counseling firm will never ask you for an upfront fee before they review your case.
2. They pressure you to act fast
They know how to make you feel flustered enough to give them money without thinking it through.
3. The company contacts you first with an unsolicited offer
Scammers may reach out in many ways like text, email, or phone. Be wary if you didn’t contact them first.
4. They tell you to “cease contact” with your creditors
Your financial situation could go from bad to worse if you ignore your creditors completely.
5. They tell you to stop paying your bills.
Scammers will ask you to send the payments to them instead of your creditor. In the meantime, your debt will be handed over to collections, which may lower your credit score.
6. They refuse to disclose the terms
If they won’t tell you how much you’ll owe, what the interest rate will be, or explain exactly what you’re getting yourself into…this is not a reputable company.
7. The word ‘forgiveness’ comes up often
When most people see the term “loan forgiveness,” they interpret it to mean that the debt was canceled. You rarely can get 100% of your debt forgiven.
8. The company isn’t interested in your debt — just your payment info
A reputable debt counseling company will ask you questions about your debt, like how you accumulated it and will want to understand your finances better. A company that just cares about getting your money will skip these questions and focus on getting your Social Security number or bank account information instead.
This is just another sales tactic designed to get you to act before you have time to think.
9. You’re pressured to make a decision
A legitimate credit counseling service won’t subject clients to any kind of sales pitch. When you hear phrases like “act now,” “limited-time offer,” or someone mentions a deadline by which you need to make a decision, that’s one sign of a scam.