Consumer borrowing easily spirals out of control when paying exorbitant interest rates. In the distant past, each state limited interest rates to a level established by usury laws. Today, because of interstate banking, each lender issuing credit cards may establish headquarters within the state offering the highest possible legal rate. To combat interest rate increases up to 30% APR and more, many borrowers consider enrolling in a debt consolidation program.
Debt consolidation programs tend to fall within two categories. First, a new loan may repay an assortment of liabilities and aggregate principal for one monthly payment. New loans may reduce payments, reduce total interest charges, or reduce both. Second, management plans and settlement plans combine existing accounts under the administration of a consolidation company. Accounts are not immediately repaid, however negotiated discounts may substantially reduce the total amount necessary to meet all monthly obligations. In addition, plans may shorten the amount of time necessary to repay all accounts in full. Both categories deserve careful consideration when experiencing difficulty making monthly payments.
The best companies offering these products and services are easily identified. Top-rated firms develop long-standing relationships with customers and industry organizations. These firms receive few complaints over many years of continuous financial operations. Customer recommendations are plentiful and perhaps friends or family members may provide positive recommendations based on experience. State or federal regulators may also provide a useful source of information and confirm years of operation without any significant violation of rules or laws.
Identifying companies to avoid is equally easy. A history of litigation is never a positive indicator. Excessive complaints with the Better Business Bureau should eliminate any company from consideration. A consistent pattern of consumer complaints within internet reviews should cause concern. Pushy sales personnel who fail to provide responsive answers to all questions asked are a prime indicator of poor quality service. In short, poor prospects tend to seek quick profits with little concern for customer satisfaction.
The best way to consolidate debts is to consider only the top-rated companies providing relevant services. Limit loan applications to lenders who offer reasonable interest rates, charge average fees, and use reasonable collection efforts if paying a few days late. Limit plan applications to companies that remain pristine after conducting thorough research. After receiving several offers from top-rated firms, for both categories of programs, compare expected personal profitability using each offer. Using this approach, receiving maximum available benefits with minimized risk becomes far more likely.
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