Debt Consolidation Scams

Scams thrive where there is uncertainty and confusion. Con artists look for an area where you might have real need, but imperfect understanding. Debt consolidation definitely falls into this category. You hear about some brilliant accountant saving some millionaire a couple of thousand dollars, and dream about them working a miracle for you.

Then a friend tells you about their friend who got a really good deal on debt consolidation... It sounds too good to be true, but if it works for the rich, it'll work for you, right? Wrong. The rich have friends who write laws to help them. You have a member of Congress that has never heard of you. Life has a cruel sense of humor.

 If you believe that little white sign about "erase your debt" that you saw on the side of the road, you probably also believed your husband about changing his share of diapers. But there are more subtle scams than the spam that hits your inbox. Those are the ones to be truly frightened of. Because these debt consolidation scams make sense, if only they were true.

Guaranteed Debt Consolidation Loan?

The most innocent sounding debt consolidation scam is the fee-for-loan-scam. In this debt consolidation loan scam, a loan shark, or loan officer, says that if you pay him a fee, he can guarantee you this special loan. This is a violation of federal law. Some lenders do have application fees, but you cannot guarantee a loan. Get him to give you the deal in writing, but don't hand over money. Take his card and go to the FBI. You may even get a reward.

No-loan Debt Consolidation?

A very dangerous scam is a debt "relief" scam or a "no-loan debt consolidation". What they propose is that you stop paying your bills, and send them the money instead. They will pay your bills for you and you will only have to pay about half the balances.

There are legitimate credit counseling services that do something that sounds similar on the surface. But, by the time they are discussing this plan with you, you have already done credit counseling. Also, a legitimate company will never tell you not to talk to your creditors. Yes, they sound so nice. If they sounded mean, would you believe them?

Bankruptcy Instead?

Finally, the last major group talks about "debt consolidation", then steers you into bankruptcy! Bankruptcy is what debt consolidation is about avoiding. It should be your last resort. You can never be too cautious with your money or your house. If you are already in debt, that's what you want your debt consolidation to make it easier to get out of.

Debt consolidation is not something to be taken lightly. If you have any qualms about what you are about to do, talk to a lawyer. There are consumer lawyers at your local legal aide that will sit down and look over what you are doing, if you meet their criteria. Or ask someone at your bank, the loan specialist will know what is legitimate.

Avoid Debt Consolidation Scams