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Choosing a Debt Consolidation Company

By Paul Bryan - Aug 03, 2009

Its true that not all debt consolidation companies are created equal. Consolidating your debt is a great way to get out of debt and strengthen your financial footing. When searching for a debt consolidation company, it is important to ask 4 questions to determine if they are a good fit.

1. Cost of the Debt Consolidation Program - Although you can save a lot of money by consolidating your debt, most debt consolidation services charge a service or maintenance fee typically around $35 to $50 per month. It is also customary for a debt consolidation company to require a deposit which is given back upon completion of the program.

2. Payment Schedule - When you sign up with a debt consolidation program, you make 1 payment directly to the consolidation company. It is important that they pay your creditors in a timely manner. A debt consolidation program shouldn't adversely affect your credit as long as payments are made consistently to your creditors by the debt consolidation company. Typically as part of the direct negotiation with your creditors, a debt consolidation company will determine payment schedules.

3. Penalties - Its very important to discuss any penalities for early termination. When you began the program, you provided a security deposit. If you do not finish the program, you may forfeit the deposit. The reason why debt consolidation companies require deposits is to ensure that funds are available for payment to creditors in the advent that you make payments late.

4. Written Agreement - All terms of a debt consolidation programs agreements must be in writing. Always read an agreement throughly prior to signing. Stay away from debt consolidation companies that are too aggressive as this can be a warning sign. The point of the a debt consolidation program is to help you.