How to Tell if a Debt Consolidation Loan is Legitimate

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Particularly since the COVID-19 pandemic, people have been uncertain about their finances. Some have fallen on hard times because they were terminated or laid off from their jobs. Desperate times cause people to take desperate measures. Many will try anything to stop the bill collectors from calling. Scammers know this and prey on the innocent. Make sure that you do not fall prey to debt settlement scammers. Here is how to tell if a debt consolidation loan is legitimate.

What Is Debt Consolidation?

Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off multiple others. The financial strategy is commonly used to erase high-interest credit card debt. If your credit score is up to snuff, you can come away with less interest than you’re paying aggregately on existing debt.

Another benefit is that debt consolidation streamlines bill paying, since you only must concern yourself with one fixed payment monthly, as opposed to several bills of varying amounts.

Types of debt consolidation include personal loans, home equity loan or home equity line of credit, loan from a family member or friend, and a loan from a bank, credit union, or online lender.

However, there are unscrupulous actors out there who are ready to take advantage of your situation. Some of them are pretending to be debt consolidators when they’re actually debt settlement companies, which negotiate with a debtor’s unsecured creditors on your behalf to get some of your debt forgiven.

It Sounds Too Good To Be True

Companies like Freedom Debt Relief, a legitimate debt consolidation loan company, put everything in writing. Steer clear of companies that are vague about details or that overpromise. Do research to make sure the company is legit. Contact your state’s attorney general’s office to see whether there have been complaints lodged against the company you’re interested in. There are many tools that you can use to research the credibility of a company.

You Feel As Though The Company Is Too Assertive

If you’re feeling pressured, you might be dealing with a scam. Any legitimate company will present options to you and you should not feel a pushy vibe from the jump.

You’re Asked To Make A Payment Before Anything’s Done

This is likely a debt settlement company in disguise since consolidation companies don’t ask for monies other than processing fees and loan repayment. It’s a tricky situation even for debt settlement companies, since some may ask for funds for them to put in an

escrow account for you. Just be wary because if you’re making payments and the company isn’t sending them to your creditors, you’re in trouble.

You’re Told To Cease Contact With Creditors

Another red flag is if the company you’re interested in advises you to stop communicating with your creditors. Most above-board firms won’t make such recommendation.

You’re Told To Stop Paying Your Bills

Again, this is likely a debt settlement company posing as a consolidator. Such a tactic regarding your creditors is fraught, since ceasing to pay bills will lead to an avalanche of late fees and interest.

You Get An Unsolicited Company Offer

Any legitimate financial organization will not be cold calling you to solicit business. Pay particular attention to any company that claims to be part of a government program. That’s likely an attempt to establish a sense of legitimacy.

So, now that you know how to tell if a debt consolidation loan is legitimate, you can move forward with confidence toward a path of positive financial health.



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