How to Evaluate Debt Consolidation Services

Debt consolidation is the bundling of outstanding debts into one consolidation loan. During the consolidation process, debt consolidators can reduce interest rates, eliminate late fees and lower minimum payments. Once you find a licensed credit counselor who specializes in debt consolidation, you can begin the debt consolidation process. Evaluate the debt consolidation company and the services it provides to be sure you are receiving the best consolidation loan.

Instructions

1

Hire a licensed credit counselor. Most licensed and legally operating credit counseling agencies are members of a national trade association. The American Association of Debt Management Organizations (AADMO) is the largest trade association for the credit counseling and debt management industry.

2

Schedule a consultation. Bring your billing statements, credit card agreements and loan contracts so the debt consolidator can review your credit information and provide a quote free of charge. Inquire about service fees before making an upfront payment.

3

Compare your new loan against your old loan. Look for lower interest rates and lower monthly payments (over a longer term) for your consolidated loan.

4

Request the cancellation or reduction of all penalty fees. Creditors can impose late payment and over-the-limit penalty fees. Inquire about canceling or reducing all or a percentage of these fees to lower the amount of debt bundled into your consolidation loan. Most consolidation programs offer penalty fee reduction services; however, the negotiation process will determine how much is reduced.

5

Consider program services to stop harassing phone calls from creditors. Ask how soon the debt consolidation can stop calls and letters from creditors attempting to collect old debts.