Depending on whom you talk to, debt consolidators can be a blessing or a curse, getting you out of debt quickly or only making things worse. Before signing any contract with debt consolidators, it will pay off big to take the time to learn about the company and their past business practices. While most companies are very diligent in handling other people's money, there are some that have misplaced the trust their customers put in them and made their financial troubles more foreboding.
For the most part debt consolidators work with their clients in devising a plan to get them out of debt via debt repayment. They work to negotiate lower payments with creditors and find ways to help pay off the higher interest loans first, and then the smaller loans that are less costly to maintain. They also work with their clients to devise a budget with which the client can live while getting out from under a heavy debt load.
Creditors on the other hand may be willing to work with debt consolidators and agree to reduced monthly payments. However, their good nature may come to a screeching halt if the debt consolidators continue to make late payments on behalf of their clients. When payments are missed or simply ignored, it is not necessarily the debt consolidators that suffer. Late payments are reported to the credit bureau in the name of the debtor and not the name of the company that is supposed to be helping them.
The fees charged by debt consolidators can also vary significantly and the amount they charge for their services do not necessarily reflect the level of service they provide. Some of the most expensive debt consolidators have been shut down after failing to pay bills for their clients, with the customers out their money and the debts still remaining. Using debt consolidators that only have an online presence may be one of the most dangerous as they can set up shop in a matter of minutes, take the money and disappear before clients realize they are gone.
Checking with the better business bureau in the community in which their office is located can give a pretty good picture of their reliability and how long they have been in business can also be a good indicator that you are trusting your finances to the hands of a reputable firm. With most debt consolidators, their fees are taken off the top of your monthly payments so the total amount you pay that goes to your bills every month will be diminished by that amount.
Excessive fees are more the exception to the rule, but there are legitimate business expenses related to this industry such as postage to mail out the checks every month and maintaining files for each client. Most reputable debt consolidators are transparent when it comes to the fees they charge and are willing to share with their customers how the fees are used. Those that are less than up front with how they are spending the money may not be quite as reputable as many of the others are.
