Debt Consolidation Refinancing - What's in the small print?

You must do yo your homework before signing up with any debt consolidation refinancing company. Here are some things you can do to safeguard yourself.

Run a check with your local consumer protection agency, state Attorney General and the Better Business Bureau to see if there is any consumer complaint about the debt consolidation firm you have in mind to use. However, be aware that just because no complaints are on file does not mean that they are legitimate. Ask your state Attorney General if debt consolidation companies need to be licensed in order to work in your state and, if so, check their license status.

Ask the debt consolidation company for full details (in writing) of the terms of any debt consolidation loans, including any establishment fees, interest rate, early repayment penalties, security or collateral required, whether you are required to file for bankruptcy to obtain the loan, etc. Before you sign a contract, be sure it specifies:

• Payment terms including the total cost of your debt consolidation loan.


• A detailed description of the services the debt consolidator will perform.


• The promised result and the time frame it will take to achieve this.


• Any guarantees promised verbally by the debt consolidation company.


• The debt consolidation firm’s name, business address and contact details.
  

It is of paramount importance to insist on written terms and conditions. It is usual for these documents to be written in complex legalese - if anything is unclear, make it a point to seek clarification and have the terms confirmed in plain language that you can understand. Get everything in writing, and read the fine print of your contracts carefully. If any warning signs come up, it is better to trust your instincts and avoid that particular debt consolidation firm.

When all the debt consolidation refinancing costs are added up, you may find that it is not the right solution for you. How do you decide if debt consolidation refinancing is or isn’t right for you? I will step you through what to look for in my next blog. In the meantime, watch out for scam artists and do not sign any document if you do not fully understand what it means or feel uncomfortable about doing so. And keep cultivating your new spending money wisely habit!