Debt Consolidation Company: Is It Really A Knight In Shining Armor? |
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Find out everything you wanted to know about credit like using
free credit report in credit repair. Understand consumer credit counseling and debt consolidation credit counseling. Use low-interest credit cards in debt consolidation for repairing and rebuilding credit and keeping bankruptcy at bay. Advertisements of debt consolidation companies are all over TV and the Internet: "Save thousands! Save up to 40% off monthly bills. Become debt free! Credit counseling can help you rest peacefully at night!" Promising words, but they could easily turn out to be a nightmare. All is not right in the debt consolidation credit counseling industry, which is worth billions. Observers will notice debt consolidation companies mention being a non-profit organization almost instantly after their name. The purpose is to give a false sense of security by getting help from those with only your best interests in mind. Sometimes debt consolidation agencies can leave you in an even worse financial situation. Voluntary contributions or fees are mostly high. Agencies can be fraudulent or run by executives with dubious records. Usually operating as non-profit, they dish out huge salaries and make irresistible deals for goods and services with related companies. They also divert customers to the profit-oriented affiliated companies dealing in debt consolidation or home equity loans. Strangely enough not a single debt consolidation company actually turns out to be non-profit. To get the official status of non-profit, most non-profit debt consolidation companies need to qualify with the IRS tax code of 501 (3). Qualifying requirements remain obscure. A debt consolidation company has to only maintain its non-profit status by not making any profits. For all debt consolidation companies, the normal operating expenses comprise employee salaries, advertising costs, business travel, business meals, etc. The ones in control of the non-profits stand to gain a lot in handling all the money inflow as donations. A majority of non-profit debt consolidation companies require donations as a flat fee or a percentage of your payment every month to meet the operating costs. Another aspect to note is the title of debt consolidation which created enough controversy to result in repackaging as debt negotiation or debt settlement companies. They are even worse than debt consolidation companies in employing illegal tactics. Steer clear of them. Use utmost caution. Most debt consolidation companies are in a precarious state lately. Apart from being sued by multiple attorney generals, the FTC and IRS are investigating their so-called non-profit claim. It is advisable to refrain from dealing with any debt consolidation company but if you are really keen to risk your credit and money you lack, find out from your local consumer protection agency and the Better Business Bureau in the company's location. Extra caution is necessary for the debt consolidation companies listed as follows: o 1st Federated Consolidation o 1 Stop Debt Consolidation o 4A Debt Consolidation o 800CreditCardDebt.com o A1 Debt Consolidation o LowerMyBills.com Avoid any of the above-mentioned companies or others that resemble them. Some of the listed debt consolidation companies advertise prominently as non-profit while others don't bother. There is something suspicious of the success of these companies in their continuous proliferation. The number of consumers who end up with the above-mentioned debt consolidation agencies is rising. On an annual basis up to 1 million new clients are taken in by debt consolidation companies, due to the pending federal legislation requiring individuals to consult credit counseling agencies before filing for bankruptcy and courting trouble. New York and other states also make counseling mandatory for borrowers made victims by predatory lenders. Currently debt consolidation agencies are in midst of a financial crunch. Their estimated $9 billion last year as the main source of income has been the fees collected from creditors like banks and credit card companies on repayments from clients. Creditors against counseling agency practices and faced with profit pressure themselves have been losing out on the fees. From as much as 15% they're now less than 8%. Resulting from misfortunes, credit counseling began as a sleepy cottage industry for long. Now growing and controversial it may require more help than its debt consolidation clients of being set back on the straight and narrow. |
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