Beware of people advertising free debt consolidation services. This is often a scam. These lenders or supposed financial counselors will lure you in with offers of free financial counseling when in reality they are looking to charge you “service fees” and get you a high-interest loan with crazy terms.
These groups often bring you in with any debts that are overdue. They will then attempt to contact your creditors and cut deals on interest rates and create a payment plan. This debt consolidation will be lumped into a single payment each month. This helps to reduce the amount of monthly payments into a single payment to the free debt consolidation coordinator each month.
Debt consolidation should only be a portion of an overall strategy in managing debt. When you pay off several debts and pay a single, smaller payment, it’s easier to get out of a negative cash flow situation.
Free debt consolidation is often a service of a nonprofit agency or a government agency. This is often used as a last resort before bankruptcy. One of the risk factors of using one of these services is that many individuals poor money manager. Even with the help of a reputable financial adviser, these people often fall back into a pattern collecting more debt accounts. It’s important that they get help for with consolidation and money management when seeking free debt consolidation.
How do you find a reputable financial counselor who offers free debt consolidation? You can start with an Internet search, but it’s best to get referrals and that you check with the Better Business Bureau on any firms you are interested in. Anyone working with the government should be reputable, but you should always verify their information.
Another factor, when considering free debt consolidation, is whether it has to be secured with personal property such as your home’s equity. This is dangerous because if you get behind on your payments and default on the loan, you can lose your home. Bankruptcy does not always alleviate you of the responsibility of paying this loan back if your home is tied to it. You’ll have to pay back the loan to keep your house.