3 Common Debt Consolidation Scams and How to Avoid Them

Source: halt.org

Getting out of debt can be tricky, mainly because you wouldn’t be in debt if you had enough money to around in the first place. Naturally, we’re not talking about student loans, mortgages, and the types of loans most people make as an investment in their lives.

However, that’s not why we’re here today. Today, we want to talk to you about people who try to take advantage of the people in debt. There are so many debt consolidation scams out there, which is why we wanted to give you a heads up and show you how you can recognize and avoid them. So, without further ado – let’s get right to business.

Common Debt Consolidation Scams

Let’s start off by talking about the common scams.

1. Cash Advance Scam

Source: medium.com

Think about this one for a minute – why would a lender ask you for money upfront? It doesn’t make any sense. They should be the ones giving you the money so that you can consolidate your debt, not ask you for an upfront fee so that they could loan you a bigger sum.

What these scammers do, is they promise to deliver you a loan with a low interest rate if you pay some money in advance. The problem with this is – there is no way they can get you a lower interest rate just because you’ve given them money upfront. You can either get a low interest rate or not, and that’s just the way it is.

If you have a bad credit score, there is no way you’re going to get a good deal on your loan from a legitimate source. So, if the lender asks you for some money upfront, promising to get you a better deal – don’t do it. The only thing that’s going to happen is them leaving with your money.

2. Credit Repair Scam

You’ve probably seen a lot of these commercials or ads on TV or in newspapers. Essentially, a company promises to repair your bad credit in a matter of seconds, and all you have to do is pay them some money. Sounds lovely, doesn’t it?

Well, the only problem with this is that there is no way in hell that is possible. The only way for you, or anyone else for that matter, to repair their bad credit is to pay off the debt and start paying your monthly fees on time.

This is arguably the most common scam nowadays. These scammers frequently manage to collect thousands upon thousands of dollars and simply disappear, leaving the people in an even worse financial situation. Therefore, if you ever stumble upon one of these – don’t fall for it.

3. Impersonating Scams

Source: cyber.nj.gov

Sometimes, you’ll stumble upon the scammers that are trying to impersonate a legitimate financial institution. The biggest problem is, the scammers have gotten so good at doing this it can be quite hard to catch up on what’s going on until it is too late.

These guys will put a lot of effort into making it look as real as possible, but the problem is – you can never pull out a perfect scam.

The thing is, every legitimate financial institution has their own website, with a registered domain name and so on, and the scammers can’t copy that. They will usually have to alter the URL in some way, and it is up to you to try and find it.

Another thing you can do is try and authenticate the business. Check their address and phone number with the Better Business Bureau and if it comes up legitimate – go for it.

How To Avoid Debt Consolidation Scams

Now, let’s talk about how you can avoid being scammed.

Do Your Research

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The worst thing you can do is just go with the first debt consolidator you stumble upon. Instead of being irresponsible – do your research.

There are numerous sites that where you can check whether the lender you’re considering dealing with is legitimate or not.

For instance, if you were to look for a CreditAssociates.com Review, you would see that they’re America’s number 1 option when it comes to debt consolidation, according to BBB.

Never Pay Upfront

We’ve already told you this, but it can’t hurt to double down on it. You should never pay an upfront fee when you are looking to secure a debt consolidation loan. The only possible outcome in this scenario is you losing money, and we are pretty sure that is not something you’d want to do.

Avoid Guarantees

Source: cactusconsulting.com.au

Lenders will often try to persuade you with big promises, but scammers will try and persuade you by offering guarantees. A guarantee is one of the biggest red flags in this business. The thing is – no one can guarantee you anything. They can’t guarantee that you’ll get approved.

You’re looking to get an unsecured loan, and if you really think that someone would give out unsecured loans to absolutely everyone – you’re mistaken.

Beware Of Phishing

Phishing is a process of illegally acquiring sensitive information about someone, and if the lender you’ve approached is asking you for your username, password, credit card details, social security number and so on – run away and report them.

Just walking away from something as shady as this is not enough because someone else is going to fall victim to these scammers, and they’re going to lose their money, and possibly even their identity.

Go To Reliable Lenders

Source: financenvestment.ca

Don’t try and take a shortcut. The best way to consolidate your debt is to reach out to a reliable lender like a credit union or a bank. This way, you can be certain that you won’t be taken advantage of and that you will actually get to repay your debt someday.


We are fully aware of the fact that most people can’t really turn to a bank and get a debt consolidation loan because of their bad credit, but you also shouldn’t rush into things. Take your time to explore your options, be thorough in your research and avoid the things we’ve just mentioned. If you do, you should be able to deal with your debt sooner rather than later.