Avoid the Hidden Fees and Shady Techniques of Bill Consolidation Companies

Bill consolidation, or debt consolidation as it is also called, can be seen by many as a saving grace for their credit as well as for their future financial independence. Unfortunately, things are never as easy as they seem and a quick fix is, more often than not, anything but. This rule applies just as much to the area of debt consolidation as anywhere else, if not more so.

As with any kind of monetary situation, one must always be sure to check the fine print. This point has been hammered home far too many times, though, and may be seen as patronizing to a person suffering from crippling debt. Still, the idea bears repeating. Another "duh" rule in bill consolidation matters is to research the company with which you may be potentially doing business. This is one subject that most assuredly bears repeating.

Not all bill consolidation companies are evil but, if you dig a little deeper into even some of the most popular companies, you will find practices that belie the "savior" aspect that many of these companies try to tout. One such practice that is common among consolidators is a semi-hidden fee that is included with the monthly payment that you send them. This fee is based on a percentage of your monthly payment (typically around ten percent) and when they pay your creditor the payment, they get a kickback that is about equal to this percentage. Essentially, an unaware buyer may be paying ten percent of their monthly payment to do something they can do themselves with ease; that is, negotiating a lower interest rate directly with the creditor.

Another sneaky trap to be wary of is the interest rate that a consolidator may impose upon you. When you are in debt, you are understandably willing to undergo any kind of change as long as it means you'll see a light at the end of the tunnel. When consolidators lower your monthly payment to create a prolonged payment plan that stretches over a longer period of time, they may also raise your interest rate to the point that you may in fact be paying more than you would have without dealing with a third party. If this sounds like yet another obvious statement, keep in mind that many people fall for this ploy every day.

In the end, the best advice one can take when considering consolidation is to research the company that you intend to do business with thoroughly. This means looking at customer review in publications and online, googling their name, and everything short of finding out the CEO's grandmother's maiden name. Debt is a mortifying thing, but there is one thing scarier than it: Furthering your debt because of shady consolidation practice.