Debt Consolidation Companies

Nothing worse than debt. No, really, there’s nothing worse than debt. Death is worse than debt. You got me there. Death is that card everyone pulls out when you’re arguing, and to end the conversation, the other side throws out, “it could be worse, they could be dead!” It’s a lazy way out, and one that should be called out emphatically and often. With all that said, debt is bad news.

Now, taking on some debt makes sense. For example, if you have a reasonably well-thought-out business plan, investors on-board, and you need a loan from the bank to jumpstart the process. Once the credit is extended, you are taking on debt. If the business evolves in the same manner as your projections indicated, you’d pay that debt off at some point and are then free with your partners to reap your exorbitant profits. In this instance, the debt made sense. You took it on get you to the promised land, and without it, the only promised land you had moving forward was perhaps a move down to the spacious basement in your parent’s place.

Debt is a significant part of most societies. It derives from lending which, regardless of your political or economic leanings, most accept as a beneficial function of a working community. When you start to rack up debt, however (a result of your inability to pay it back in time), you will likely find yourself indebted to multiple lenders. Once this occurs, you are then paying monthly payments at different interest and penalty rates. You are probably paying more in total than if the entire amount was structured under one lender.

A debt consolidation company does just that. The company will generally offer a lower interest rate than what the borrower is paying on their credit card (or similar debt), and the benefits are clear – lower monthly payments, one payment with one lender. The best place to start in terms of seeking out a debt consolidation company is the Better Business Bureau (BBB). The BBB maintains an up-to-date website where one can review the various debt consolidation companies and their respective accreditations. A potential client can also see if said company has had any relevant complaints or whether any legal actions have also been filed.

Some of the first things to discuss with a consolidation company is the interest rate, loan terms, and fees/other costs. The interest rate should ideally be less than what the borrower is currently paying. Focusing in on a lower monthly payment as opposed to a lower interest rate is a mistake. Loan terms are another area to review carefully. Going from a plan to pay off the debt in 10 years compared to 15 years at a reduction of merely $25 per month, for example, is not a great deal. And lastly, the fees and other costs. Some lenders will charge upfront fees to transfer the debt. Keep an eye on these as the sum of said fees could end up being more in total compared to the monthly costs with the initial lender.

Bottom line, do your research, get up to speed on the language and terms of your debt, and understand that no company out there is out to help you for free. Just because they’re consolidating your debt doesn’t mean they don’t have to abide by the same economic rules as the rest of us.