The following is a guest post from Smart Military Money, a site dedicated to personal finance for veterans, servicemembers and their families.
Kudos to you if you have yet to fall deeper into debt this year.
Otherwise you likely represent a sliver of the $21.3 billion in credit that consumers accrued in March alone, according to the Federal Reserve. Whether you’ve paid off debt or spent too much this year, $21.3 billion in consumer credit better get your attention, because it undoubtedly got the attention of debt relief scammers.
With such a drastic monthly increase in consumer credit, scammers will try to prey on desperate consumers. Arm yourself with knowledge against these unscrupulous capitalists by following some of these tips.
Explore every option
The easiest way to avoid a debt relief scam? Don’t use a debt settlement or consolidation service. If you can get out of debt yourself—which likely means it’s not an exorbitant amount of money—then do so. You don’t need a third party.
Do your research
Once you decide to go with a debt relief service, get busy learning everything you can about the business. The National Business Reporting Bureau, Yelp and the Better Business Bureau should provide you with some insight on the business’ reputation. Also, the Internet is a wealth of knowledge, especially when it comes to disgruntled customers.
Take any negative review as a red flag. When a business or service is advising you on how to handle your money, there is no room for risk taking. Ask friends and family if they ever used a favorable service, too.
Spot a scam
Cease contact with a debt relief company if it:
- Doesn’t tell you about the debt consolidation or settlement process as it’s being done
- Suggests you stop paying creditors
- Charges a large fee upfront. Charging advance fees before actually providing a debt relief service is illegal in some states.
- Requires personal ID information—such as Social Security number or bank account number—before offering a quote
Use common sense and go with your instincts. Don’t enter into any agreements without first knowing what you’re getting into. As soon as you feel uncomfortable with a company for any reason, walk away.
Know when it’s too good to be true
Fraudulent debt relief services boast that they’ll have you debt free in weeks or that their success rate is almost 100 percent. Worse yet, a company might claim they “know people” or “have connections” that somehow eliminates your debt.
Don’t fall for it. These claims are simply ploys to attract consumers. Unfortunately, these work on desperate consumers who contributed to the overwhelming amount of debt accrued in March.
Be inquisitive and read carefully
As with any written agreement, before you sign, read it thoroughly. The tinier the print, the better you should understand it. If there’s any vague phrasing, ask for a detailed explanation. Terms and conditions of a fraudulent company are likely to stand out to you. Keep in mind that even a well-established company might toss something in your agreement that could further hurt your finances.
Ideally you’d never need a debt relief service, but it could happen. Auto loans, mortgage payments and credit card bills can add up quick. However, the best defense against a debt relief scammer is staying out of insurmountable debt.
If you ever need help consolidating or settling debt, then keep in mind the above pointers to avoid being a victim.