How to choose a student loan consolidation company?

Debt consolidation is a means of consolidating or combining a number of debts into a single loan and therefore acts as a means of easing debt. Debt consolidation makes debt repayment easier by lowering or fixing of the interest rates and because of the convenience of servicing only one loan payment. However, it should be clearly understood that consolidating the debt is a means of coming out of debt and not a straight jacket solution to debt. Debt consolidation lessens the interest rate and spreads the loan over a longer duration of time and thus, allows the borrower to deal with his/her budget more effectively.

Debt consolidation has, with time, gained importance in the global financial scenario attributing to the benefits it provides to the borrowers. Although debt consolidation is a household requirement, however, it has turned into a profitable business these days with various agencies and companies providing consolidation services. 

Debt consolidation companies

There are a number of debt consolidation companies and institutions that offer various debt consolidating loans as per individual requirements. Some of these (in no particualr order) are:

  • Prosper
  • Consolidated Credit Counseling Services
  • Cambridge Credit Counseling
  • National Debt Relief
  • Debt Consolidation Care
  • CareOne Debt Relief Services
  • Superior Debt Relief
  • United Credit Solutions
  • Debt Settlement of America
  • Trident Debt Solutions et cetera.

With so many options available to the borrower, it becomes difficult to decide the company that if fair as well as offers the right debt management plans for the individual.  Accreditation by a national agency plays an important role here by certifying trustworthy debt consolidating agencies. With a prominent presence of Debt consolidation companies, there exists strong regulation and investigation of these companies and agencies. The United States’ Department of Justice maintains a list of approved Credit Counselling Agencies by state and judicial district.

The following steps  would ensure that the borrower is able to clearly distinguish between a fair and unfair debt settlement agency and is also able to select the best option from among the various debt control options available to him/ her. 

Choosing a debt consolidation company

These are some pointers:

Accreditation by United States Organization for Bankruptcy alternative or The Association of Settlement Companies: A company accredited by any of these two associations carries a lower risk for the consumer and increases the consumer confidence. 

Cost analysis: Student loan consolidation can come with certain fee about which the consumer must know well in advance. A cost analysis would help consumer choose among the available options more prudently. Signing up for a programme just by getting lured by its benefits is foolishness. One should know the consequences of getting into a loan consolidation programme and be sure of one’s capabilities to pay the monthly loan payments towards consolidate debt.

Beware of fraudulent companies offering debt consolidation: Start doubting the intentions of a debt consolidation agency if they ask for your Power of Attorney. Fraudulent agencies use this Power of Attorney to submit a Fed Loan Servicing application form on behalf of the applicant and even charge heavy charges for such a simple job. Also, It is unlikely that you will not be required to make any loan repayment for sometime on your debt.

If your debt relief agency offers such a plan, carefully understand the offer because it might be nothing more that forbearance or default which is nothing to be happy about. It has often been observed that fraudulent agencies hide behind just a website or a contact number. Giving away your debt details to a company you know only by the website is way too risky. Also, there is nothing more that these agencies can offer you than what you can offer yourself. So stay away from draining your pockets for nothing. 

Association with Local Chamber of commerce: The consumer can be sure about the functioning of a debt consolidation agency if it belongs to the local chamber of commerce. This is another way of choosing a trustworthy company for consolidation.

Better Business Bureau: Better Business Bureau (BBB) is one of the nation’s top consumer protection and advocacy bodies. It operates throughout US and Canada and has listed certain principles which need to be met by debt relief companies to earn its accreditation.

Some of the debt relief companies accredited by BBB are Prosper, Consolidated Credit Counseling Services, Cambridge Credit Counseling, National Debt Relief, Debt Consolidation Care, CareOne Debt Relief Services, and Superior Debt Relief. The rating that BBB provides to the debt settlement companies is a source of confidence for the consumers. 

Conclusion

It is indeed risky to let someone else control your debt and finances. The risk, however, can be reduced if we follow the aforementioned steps and then go for a debt consolidation plan with a company of repute. The benefits entailing from debt consolidation are many, lower monthly payment and fixed rate of interest being the most important of them.

It is always advisable for a borrower to take out the lowest possible student loan so that it is easier to pay it back. Student loan consolidation option acts as a breather for people who do not mind increasing their over all loan repayment amount in a bid to lower their monthly payment. However, a clear understanding of the consolidation plan is a must before any commitments. Debt consolidation is just a means of coming out of debt and not a clear cut solution to debt. With so many companies cropping up each day, it becomes all the more important for the borrower to be careful enough to not fall for any trap.