How to Avoid Debt Consolidation & Relief Scams

Throughout the United States, hundreds of thousands of people fall victim to various forms of financial fraud and scams each year.

Anyone can become the victim of a financial scam, but there is a common misconception that the elderly are subject to this type of criminal activity. The reality is that individuals of any age who feel like they have few options, particularly when it comes to getting a significant investment return or a get out of debt solution, are likely to be victims of a financial scam. That is why if a business or an individual is worried about cash flow and any debt that they are in, they may wish to speak to debt professionals and look at conducting a Debt Service Coverage Analysis (DSCR) as well as manage other debt-relief steps that they might need to take at this time.

Con artists play on consumers’ emotions, and when you are in a vulnerable place, you are more likely to take the bait. This is especially true with debt consolidation and debt relief fraud, where promises are made but never delivered. Students are particularly keen on paying off debt, but sometimes this leads to them using services that are far from reputable. Oftentimes, the debt may be manageable in the current repayment arrangement. You can see when it will be paid off by using this calculator – https://www.sofi.com/student-loans-payoff-calculator/. If you’re still intent on consolidating your student debt, using the services of a reputable company like SoFi is safer than going with an unknown entity that could only be out to swindle you.

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What is Debt Consolidation/Relief Scam?

Debt consolidation is a common practice in the financial world, allowing consumers with burdensome credit card or other personal debts to use a loan or debt relief to help pay off what is owed. It is a perfectly legitimate practice as long as you go to a trustworthy company like the national payday loan relief company. Thousands of people have had their financial futures improved because they were able to get their debts. However, there are many scams that revolve around this concept so you have to be careful if you are ever looking to get this service.

A debt consolidation loan scam involves an individual or company promising an indebted consumer that taking out a new loan to consolidate other debts will solve their financial woes. Similarly, debt relief scammers offer to negotiate credit card debts directly with creditors on the consumer’s behalf. The problem is, in each scam scenario, no remedy takes place.

Debt consolidation loan and debt relief scams prey on vulnerable consumers who are deep in personal, unsecured debt. They are likely having a difficult time keeping up with credit card or loan payments each month, and they feel as though there is no other way out.

When a seemingly reputable debt relief company contacts a debtor, they offer relief, but for a fee. Some debt relief scams charge consumers several hundred to several thousand dollars up-front to clear their debts with creditors. After the consumer has paid, the company disappears and does not follow through on what it promised.

Consumers are then out of the money paid to the scammer, and they remain in the same or more debt as they were to begin with.

In some cases, victims also experience a hit to their credit. This is because the debt relief company promised to manage the process of negotiation for them or to provide a loan that pays off some or all of their current credit card balances. When this doesn’t actually take place, creditors ding debtors for late payments or serious delinquencies.

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Avoiding Debt Consolidation and Debt Relief Scams

Debt consolidation loan and debt relief scams can have devastating consequences, so know what to look out for if you’re struggling with personal debt repayment on your own. Although, before hiring a debt consolidation company, you might want to make sure that all of your options for repaying your debts have been eliminated. One such option that many people forget about is equity release. Granted, this can only work for those who have a real estate property for which the mortgage has been paid off. But this can allow the owner to get an appropriate sum (depending on the property), that can be calculated with an Equity release calculator, from the entire monetary value of the said property. The retracted money can then be used to pay off urgent debts. Those who do not have this option might have to contact a debt consolidation company, but they should keep their eyes open for clues about ingenuity.

First, there are several warning signs of a scam, often starting with an unsolicited phone call or e-mail that makes promises that seem too good to be true.

A financial services company that seems reputable may promise or guarantee that you’ve already been approved for a debt consolidation loan in the same amount as your current outstanding debt. You may be offered a quick fix for debt relief, in as little as a few days, or you may receive a high-pressure sales pitch.

The most tell-tale sign of debt consolidation or relief scam, however, is when you are asked to pay a hefty fee or sign a long-term contract up-front. These red flags typically point to a scam, and you should avoid taking any further action if they occur.

Also, be on the lookout for incomplete information from the financial services company offering relief. For instance, a company’s lacking a website or a physical office address can be a warning sign of a scam. Similarly, sales representatives may be unable to provide clear answers to your questions about how the debt relief works, if your credit is impacted, or what the fee you pay covers. If something does not seem legitimate, it is in your best interest to hang up or decline the offer.

The good news is that there are legitimate financial services companies that offer debt consolidation loans or debt relief programs. Research different companies and lenders. Check out their reviews online and their business standing in the state you live.

Ask for details about the company if you are unsure. Any financial services company offering these services should provide this information upon request. You may also consider alternatives that have no cost, like credit counseling through a non-profit organization.

Taking these small steps can make a significant difference avoiding a worse financial position. Be cautious of offers that sound like a quick fix or a blanket solution to your credit issues, and steer clear if things don’t seem to add up.

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Andy Kearns is a Content Associate for LendEDU and works to produce personal finance content to help educate consumers across the globe. When he’s not writing, you can find Andy cheering on the Lakers, or somewhere on a beach.