Top 5 Factors for Evaluating a Debt Consolidation Programme

Posted by Armstrong Louis on July 21st, 2017

The inability to pay off one’s debts is a stressful and unpleasant situation for any individual. People suffering from debts constantly worry about how to make ends meet, make the payments on time and to avoid collection calls from credit agencies. A lot of people turn to applying for bankruptcy, but in certain situations it is not the solution. There are debt consolidation programmes available from debt management companies that can be a perfect fit for debt clearance. (Information Credit: Debt Therapy)

Debt consolidation can be described as a process under a debt management plan which aims to consolidate all existing loans of an individual into one, combined payable loan amount. The payoff terms are also favourable for the consolidated loan with lower interest rates and monthly payments. The main aim of this programme is to assist individuals to be debt free and keep their credit worthiness intact.

Like most industries, debt management companies have sprung up in numbers, each promising to deliver the best service to take care of your problems. However, as an individual who has already racked up so much debt, it is of utmost importance that he carefully evaluates the company’s services he has shortlisted. Below are certain pointers to help clients evaluate a particular debt consolidation plan.

1. The client should have a proper understanding of the legal clauses attached to the agreement. Many a time, people overlook the small print and make wrong choices which affect their financial position even more. Check to see if the agreement has a legal cost cap. This means that the company cannot charge you an excessive fee as it is regulated by financial policies.

2. Paying the right person: Always make sure that the debt management company has a proper understanding of the terms and nature of your payable debts. Suppression of any facts relating to past loan amounts can be very costly.  This is necessary to form the debt consolidation programme which can vary from person to person.

3. The legitimacy of the company should be checked, especially since the presence of fraudulent enterprises has increased. Proper market research must be conducted to perform basic background checks of every shortlisted company. There are fraudulent companies who want to swindle people of their money and make a quick income. Most of the time, they are not registered with a regulatory body such as the NCR(National Credit Regulator). This information is generally presented unambiguously on a legitimate company’s website that is honest about the business they operate.

4. Making sure about the quality of advice: After a debt consolidation plan has been made, always check to see if there is not an impractical and unachievable personal budget. Make sure that the budget prescribed by them is fair and realistic and avoid companies who promise a lower monthly payment to attract more clients. A competent debt consolidation plan will keep the financial condition of the client in mind and accordingly frame a budget.

Thus, debt consolidation is a great debt management programme which helps individuals take charge of their finances. They should be selected and evaluated carefully, as a wrong move can result in a more vicious debt cycle.