Saturday, September 8, 2012

Profit Debt Consolidators Take Money, Peace of Mind

The current economic hard times, which some are now calling The Great Recession or the Credit Crunch, have hit untold numbers of people very hard through job loss, homes that are worth less than what's owed on them, or overwhelming monthly credit card payments. As a result, people are desperately looking for a way out of the financial difficulties they're facing. Unfortunately, dishonest nonprofit debt consolidation companies have sprung up, taking customers' money while claiming to help them find a way out of their financial hardships.
A non profit debt consolidation company is one that has received non-profit status from the IRS. These companies help consumers trapped in financial deep waters by offering financial counseling for a relatively low fee. They also receive donations from individuals and businesses for tax write-offs. A good company can help a consumer determine the best way to get out of debt by sitting down with him to review his income and expenses, then offering advice on ways to better allocate funds in order to pay off debts. They also may also often free education such as seminars and workshops to their communities on budgeting, credit and other financial topics.
Some companies that advertise as not for profit debt relief or consolidation companies are scams. They take a customer's money, promising to help him pay off his creditors with a monthly payment at a lower interest rate that helps the customer's monthly cash flow. However, the company may take such a large fee for the service out of the monthly payment that it doesn't meet the creditors' requirements. The debt consolidator's monthly fee may not be mentioned when the customer signs up for the service, or is buried in the small print of the contract. The customer only later discovers that he owes his creditors thousands more in penalties and fines and legal action may be pending against him.
Other non profit debt consolidation companies may promise to get the customer into a debt management program, which will lower the interest rate or reduce the debt to pennies on the dollar. Again, these companies may charge an exorbitant fee for their program, which the customer believes is going to pay off his debts, but is really going straight to the company. Other companies may promise that they can get a customer's creditors to lower interest rates or the amount of debt owed, but only superficially or never works with the creditors to accomplish this. Other companies, as required as part of their non-profit status, claim they will counsel customers on ways to avoid getting back into debt, but don't follow through.
A debt consolidation company can be a lifesaver to a consumer drowning in debt. There are things to remember, though, when searching for this type of company. The first step a consumer needs to take is to do his homework thoroughly. Any company, including those that advertise heavily on television or make extravagant promises on their websites should be investigated completely. Non profit debt relief companies can be checked out through a state's attorney general, the Federal Trade Commission, and the Better Business Bureau. Searching for the company on the internet can also provide input from both satisfied and unhappy customers, as well as any news reports about shady or unscrupulous practices.
It's also a very good idea to avoid giving any debt consolidation company, whether it's non-profit or for-profit, and any financial information through the internet or over the phone. A potential customer should meet with a counselor in person and get all the repayment plan details in writing before signing a contract. He'll need to make sure the entire monthly payment is going to the creditors. And, finally, he should check with his creditors to determine whether they're willing to work with the consolidation company. If they aren't, then it's useless to sign up with the company.
The most important thing a consumer dealing with financial problems can remember is that he won't be able to get out of debt immediately with little or no financial pain. Any company promising him this is being unrealistic, or worse, dishonest.