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Avoid Bad Debt Consolidation in Virginia and Elsewhere
By Siddarth Nagaraj on January 28, 2011

Virginia_State_Capitol-(1).jpgWhether you are in Virginia or anywhere else in the country, odds are that you will be subject to advertising which promises to liberate you from credit woes through debt consolidation. One of the most dangerous tactics to be marketed as a way to resolve credit issues, debt consolidation is also linked to innumerable scams on the Internet, and those who decide to use it should be watchful. Nonetheless, if you decide that debt consolidation is the right choice for you, there are a number of steps that you can take to protect your finances and find a trustworthy service that will give you the benefits you need.

Like many so-called “quick fixes”, debt consolidation is attractive in part because of its appeal to our desire for convenience. By acquiring a debt consolidation loan, you can delude yourself into thinking that you are simplifying your financial situation by making payments in the form of a lump sum, even though your debt must still be repaid, and you must now make allowances for the third party (the consolidation service) that you have contracted. Consequently, advertising for dubious debt consolidation agencies often feeds into an unhealthy desire to be less responsible for one’s finances. It’s important not to fall prey to this trick, especially if you do choose to consolidate your debt.

So given the pitfalls of being trapped by scammers, how can you identify deceitful consolidation services? Many consolidation programs charge tremendously high upfront fees, which can often extend into thousands of dollars. In accordance with Federal Trade Commission (FTC) regulations, only consolidation firms that are classified as “non-profit” may charge upfront fees. These groups, which are subsidized by financing companies, charge a flat monthly fee per account, whereas for-profit firms charge an additional competitive fee. Only use these services if they do not charge upfront fees. Also beware of consolidators who cite a particularly low monthly payment when asked for a quote. These consolidation companies are attempting to lure you by offering what appears to a smaller payment; in fact, these are often linked to exorbitantly high interest rates.

Amidst all the fraudulent claims of consolidation as a means of reducing your debt and regaining your financial foothold, it may seem as though there is no way to determine who can be trusted. Yet it is still possible to find reliable consolidation services. There are trustworthy organizations which keep records of certified credit counselors, notably the National Foundation of Credit Counseling. Their website includes an information phone line and a national directory of services that are affiliated with the organization. The directory allows users to search for counselors on a state-by-state basis, allowing you to look for reputable agencies within Virginia. An even better resource is the Better Business Bureau, which lists debt consolidation services throughout the nation that can be searched according to region, allowing residents of different parts of Virginia to find accredited services closer to their place of residence. BBB Accreditation is selective, so the Bureau can be a highly useful tool to identify services that may be worth hiring.

While debt consolidation is a highly alluring prospect for those seeking a way out of debt, the effects of hiring a dishonest consolidator can be disastrous, wreaking further havoc on your finances. Consolidation-related scams abound in Virginia as well as elsewhere in the nation, but you can avoid them through careful scrutiny of firms and consultation of trustworthy neutral groups. No matter which service you choose, being prompt with payments and actively involved in your finances is essential.
Virginia debt consolidation agencies are regulated by the Virginia Bureau of Financial Institutions. Image courtesy of Patrick Neil.
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