Comparing Loan Consolidation Companies: Six Research Tips

Many consumers use loan consolidation companies to reduce their debt.  Many of these companies have helped consumers reduce their debt, however, unscrupulous companies have surfaced to monopolize the demand.  Choosing the wrong company, could further increase debt.  A bad company can use excessive fees and leave a consumer in worst shape.  Protect yourself with the following six good practices:

Step One: Check with National Credit Associations

There are two national associations: The National Foundation for Credit Counseling and The Association of Independent Consumer Credit Counseling Agencies that keep records of all loan consolidation companies nationwide.  Both organizations can help you find a reputable counselor in your area, or can advise you whether one of the companies you may be considering is a good choice.  Check either association's web site to look up online records or to be connected to a local counselor by phone.

Step Two: Check With Your State Attorney General

In many states, the state attorney general’s office also handles consumer protection matters.  Your attorney general keeps a list of all loan consolidation companies which have received consumer complaints, and in some cases, may also have records of whether or not there are any lawsuits pending against the company.  If you are trying to decide between different loan consolidation companies, call or email your state attorney general’s office to check each company's records.

Step Three: Check With Your Local Business Bureau 

The Better Business Bureau also keeps records of all loan consolidation companies in your area.  They also give each company a rating based on its business practices and whether they have received any complaints from other consumers.  You can check the records of any business instantly on the Better Business Bureau’s website.

Step Four: Check Whether The Company is Licensed

Most states require a loan consolidation company to apply for a license to practice business.  In order to obtain a license, a loan consolidation company must live up to certain business standards.  If you run into a company that does not have a license, take heed, it could be a sign that they were unable to live up to good business standards.  It's prudent to avoid loan consolidation companies that are unlicensed, or are based in states which do not require a license.

Step Five: Check Whether an Individual Counselor is Licensed 

Your personal loan counselor may also be licenses.  The counselor may also have a record on file at either of the national credit associations. If they have a good counseling record, you may have signed up with a company that  pays attention to its own business practices.

Step Six: Check The Company's Fees

All loan consolidation companies will charge fees for their services. A responsible company will be clear about their fees and will explain why they are charged.  Take the time to ask each company you are considering what kinds of fees they charge and why.  If you don't receive good feedback or they seem unwilling to explain their fees look for another loan consolidation company or counselor.


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