The concept behind debt consolidation is taking many debts and turning them into one — at a lower interest rate, to boot. However, not every consolidation firm is created equal. As the consumer, it’s your job to avoid potential scams and find a proven program that suits your needs. Choosing the right partner can help you escape debt sooner and for less money, while putting your eggs in the wrong basket can seriously set you back on your debt repayment efforts.
Here’s more on how to find the most reputable debt consolidation companies while avoiding the bad apples in the bunch.
Features of Reputable Debt Consolidation Companies
Although there are different ways to go about consolidating debt, reputable companies share some core values and attributes.
Let’s start with what you don’t want to see from a consolidation organization. It’s generally advisable to steer clear of any companies that:
- Insist on rolling all your debts into consolidation, regardless of the interest rate on each account.
- Charge steep fees up front before they have provided you with the agreed-upon service, something that is illegal under Federal Trade Commission ruling.
- Requests your financial information (like account numbers) before giving you information about the program and a no-obligation quote.
- Quoting a monthly payment much lower than competitors, as it may be an introductory offer or a way to draw attention away from higher fees.
Each of these features could indicate a consolidation scam, or at least a legitimate company more concerned with bottom line than with establishing a proven track record of helping clients.
On this note, you’ll also want to check online reviews when seeking out approved debt consolidation companies. Seeing what other borrowers have to say about their experience working with a certain company goes a long way in revealing its reputation. While occasional bad reviews are to be expected due to the nature of the business, any legitimate company should have a healthy number of positive reviews and success stories easily findable online from individuals and third-party review sites.
Leading consolidation companies also tend to be accredited by organizations like the American Fair Credit Council and similar “watchdogs” of the industry. These accreditation organizations will only lend their stamp of approval to companies that uphold certain standards of conduct. Pro tip: Start your search for a consolidation company on the website of a reputable accreditation firm to avoid scams and bad actors from the very start.
How to Find Reputable Debt Consolidation Companies
Many financial sources — like NerdWallet, U.S. News & World Report, Bankrate and many more — publish monthly lists of available consolidation products broken down by features.
A borrower looking for a consolidation loan could then compare their options at a glance based on attributes like:
- Annual percentage rate (APR)
- Company rating
- Maximum loan amount
- Minimum credit score required to qualify
The consolidation partners on these lists have generally been vetted for quality of services and consumer ratings before publication, which means they are among some of the most reputable options out there for borrowers. When in doubt, take into account what financial experts and third-party publications have to say about debt consolidation companies before signing up.
The most reputable debt consolidation companies operate using high standards, which will be reflected in their consumer ratings and their third-party accreditation. In particular they will happily provide all the information borrowers need to make an educated decision and will avoid collecting fees before delivering their services. Be wary of any company offering suspiciously low rates or trying to pressure you into enrolling straight away.