You see all of the ads, and you wonder if it can really be true, is there really a free debt consolidation loan? The answer to that is obvious there isnt. Certainly, it might be free in the respect that you dont have to pay any money up front, but its not free after that.
Different companies work it different ways, and you have to make sure you know right up front what is going to happen. Having a relative who used to work for a bank, you can be sure that some of these companies take the first two to three months payments in return for their services. This means that your creditors may get nothing for the first two to three months after you sign up for debt management services. Other companies charge a percentage of the monthly payment or a certain dollar amount per month to service your account.
Can you be sure how your money is going to be distributed? The safest method of all is to get it in writing. The contract you sign to accept their services should tell you how the money is distributed to your creditors, how much they will take as a fee, and when the payments will start being distributed to the creditor. If that is not defined in the contract, dont sign it until it is.
Debt consolidation, like anything else, costs money, and anyone who tells you they can do it free is not giving you all of the facts. The problem with us as part of the human race is that we like to believe there are things that are “free,” when in reality, it means “free with conditions.” Unless you are dealing with a non-profit agency, the company has to make money, and they certainly arent going to ask the creditor to pay for their services, so who else is it going to be? Did you really believe that you were going to get something for nothing? Everyone has to pay bills, and in order to do that they have to make money. Its not realistic to think that someone is going to work out a program with your creditors and not expect anything in return.
The best thing is to find the company that is going to charge the least amount for the services, and not the one who wants to hold two or three payments before sending the money to the creditor. You want to find a company who takes a percentage or a flat fee, but is willing to send each payment in a timely manner. After all, the creditor will probably cancel your program if you default on the payments, and though it wont be your fault, the consequences will be the same. Save yourself the stress and research several companies first and choose the one who is going to charge you the least for the service and will provide the highest quality of service. You can do this by first checking them through the Better Business Bureau, and then review their fee schedule if they have no complaints filed against them.
Darnell is a writer for several websites. For more information on free debt consolidation visit our online debt consolidation blog.