Warning Signs: Debt Consolidation Scams
Debt consolidation is becoming a common phenomenon as more and more Australians find themselves deep in the hole. Higher cost of living, mortgage payments and even basic things like groceries are being put on plastic as salaries fail to keep up with price increases.
Australians have taken the lead when it comes to personal debt, as each Aussie owes roughly around $56,000 USD. That’s $12,000 more in personal debt than their U.S. counterparts. In total, in 2010 Aussies as a whole are looking at a debt total of about $1.2 trillion – a 71% increase since 2005.
It’s not just individual Aussies that are having a problem though – the government also seems to have maxed out its credit card. The Australian government handed out about $42 billion in stimulus packages – the highest of any developed country – which left the government at a deficit. This deficit means less cash handouts to Australians and higher interest rates on loans and credit as Aussies living beyond their means already struggle to keep a handle on their debt.
Consequently, debt consolidation is looking really good to a lot of individuals Down Under.
If you are one of those individuals who can’t seem to pay off their debt, consolidation may be a good option for you. By essentially being the middle man between individuals and creditors, consolidation could pay an instrumental role in lowering your debts so that you can pay them off faster. However, choosing a debt consolidation service may not be as easy as you think, as many have proven to be scams.
The most important thing in these cases is to choose a credible company that can find the right solution for you. If you are seriously considering consolidation, keep in mind some of the following “red flags”:
When They Promise to Pay off Your Debt in 1 or 2 Years
Due to the volatile nature of credit laws, policies and settlements, it is highly unlikely that anyone with several debts to consolidate will be able to pay them all off that quickly. A credible debt consolidation service would make you aware of that, while those that promise an easy fix are probably a scam.
When They Aren’t Registered
By law, consolidation services need to be registered with the appropriate government entities. This makes it easy to look up the company’s history and decide whether or not it’s right for you. You may come across debt consolidation companies that flaunt their many connections, but if you can’t look them up through the appropriate means, then don’t bother with them.
When They Charge a Fixed Commission
Beware of companies that charge you a fixed commission based upon the amount of debt you find yourself in. Credible companies usually only charge a part of the money they have helped to reduce.
When They Suggest Taking Out Loans
Any company that suggests taking on more debt in order to pay off your current debt is out of their minds. That’s how people end up in bankruptcy.
Debt consolidation could be a viable option for you if you find yourself in trouble. Keep a lookout for these red flags and make sure to pick the right company for you.
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