The Truth About Debt Consolidation

disburse the funds to your creditors. Each month the agency will send you a statement showing your account activity and remaining balances. Now your debt is consolidated, and without your having to borrow a dime.

The agency will charge you a *nominal* monthly fee -- something like $1 per creditor, which covers the cost of mailing out statements. Since they are non-profit, their purpose is to provide assistance, not to fleece you. (Most of their fees come from the creditors, and in some cases from grants, fund-raising, etc.)If you find an agency that charges a hefty up-front fee or tries to load on the service charges, go somewhere else. It's a scam in the guise of a non-profit agency.

And finally, ask some basic questions: How long have they been in business? Try to get a referral from a current or former client. Most states require agencies to be licensed and to carry a bond, but even if they are in compliance, this won't help you if they take your payments and then don't pay your creditors on time. I've actually had clients who enrolled in these programs, made their monthly payments, and *still* received collection calls, because the agency was poorly managed, made accounting errors, and didn't disburse funds to creditors on time.

Put your house at risk for consumer debt? Trade a lower payment now for a longer period of indebtedness? Pay a third party and trust them to make your payments on time every month? As with all consumer decisions: Caveat Emptor.

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