The loan consolidation market is quite large and there are many different consolidation companies offering different plans and payday consolidation. These include debt management, debt negotiation, debt relief and debt settlement. Therefore, it is for consumers to decide which particular program for consolidating debt is the most appropriate for themselves. This decision must be based not only on the counseling process that most companies offer, but also on the quality of customer service these companies provide.
Loan consolidation must dealt with it in an understanding manner. This makes customers more comfortable and open to suggestions of how to consolidate their outstanding debt. Reputable consolidation companies are known for their customer service that includes giving clear and specific answers which are provided by a team of certified counselors, thus gaining the trust of their clients. Another important aspect of consolidation counseling is to not only to find the best solution for the debtor’s current situation, but also to find out the root cause of the problem and find a way to avoid it the future.
Good consolidation companies are also known for being transparent and for not having false and misleading advertising.
They are open in their terms and conditions, charges and practices and are always able to verify all claims they make. Whether a company is really transparent or not can be verified through several different methods. The easiest is to check their website.
It must include the names of its executives, a physical address, date of establishment and means of direct contact. Customers should also check whether or not the company offers consolidation loans in addition to counseling and debt management programs. They must be clear about the fees and rates they work with. Check if there is a prepayment penalty, maximum and minimum amount of debt, credit score and other requirements.
How long the company has been around and its trust rate are also of great importance. An accreditation from the Better business bureau (BBB) should be considered a great advantage, combined with the list of resolved complaints that the BBB publishes.
Rules and regulations of the FTC
The Federal Trade Commission (FTC) wrote the Telemarketing Sales Rule (TSR) that is meant to protect consumers when dealing with debt consolidation companies. These rules are about the prohibition of upfront fees and fees collected before the final settling of the customer’s debt.
The settlement must be agreed upon in writing. Also, in a case of several debts, the company may charge a separate fee for each of the consolidated debts, but before its settlement. Upfront information on how long the consolidation process will take should be provided to the customers.
Loan consolidation scams signs
Although there are a lot of strict regulation acts in the market, debt consolidation is still known for a variety of scam practices. Therefore, consolidation customers should be aware and look out for signs of possible scams. These may include a profit company that claims to be a non-profit organization; advertising consolidation programs that are too good to be true; charging upfront fees, aggressive sales practices or impossibly fast consolidation programs (most consolidation programs take up to five years).
Payday loans are an excellent solution for financial emergencies. Nevertheless, loan borrowers should be aware that they usually come with enormous interest rates and are often rolled over several times. This results in an unmanageable debt amount. Therefore, before considering a rollover, a payday loan borrower should consider payday loan debt consolidation. By taking out a payday consolidation loan, the interest rate would be reduced significantly because several loans would be consolidated into a single one. Moreover, if the borrower gets into a debt management program, this would give him more time to repay what he owes.
Warnings about payday consolidation loans
Although loan consolidation can be a good way to cope with existing debt, it may not work for everybody. First of all, the interest rate of a consolidation loan should be manageable and not more than what the debtor is already paying. Also, the loan period should not last long enough to make the final amount of the debt more than what it was before consolidation.
The payday consolidation loan should not be too expensive. This means that it should not cost the borrower too much to service the loan. The goal of consolidation is to decrease monthly payments, not increase them. Also, the borrower should be able to easily meet the monthly repayments of his consolidation loan and have enough cash left monthly after paying his obligations towards his creditors.
A secured consolidation loan is an option, but it must be carefully considered because of the involvement of a collateral. Interest rates and fees would be less. However, if the borrower is unable to repay the loan on time, her may lose his car or house.
How to consolidate student loans
If the borrower has taken out several student loans and is unable to repay them, he may try student loan consolidation programs that are advertised both by the government and private lenders. The borrower will combine his loans into a single one with a fixed interest rate that is calculated on the basis of the average interest rates of the consolidated loans.
There is also the option of a direct consolidation loan that allows borrowers to consolidate more than one federal education loans. This doesn’t cost anything to the borrower. The borrower can complete a Federal direct consolidation loan application and is completely free. This way, he will not only confirm the outstanding loans he has to repay, but also agree to repaying the consolidation loan. After the application process, the borrower will only have a single monthly payment to make. This way, he can significantly decrease the final amount of his debt.