We are not big proponents of debt consolidation to start with. Most of these companies are owned by the credit card companies already, and are not going to do you any favors. They try and “sell” you their non-profit status; however the drop-out rate for any one of these programs is 85% within the first year alone.
Now we hear about new companies coming out called on-line debt consolidation companies. That is the very last thing you would ever what to do in your life. However, let’s examine their story here.
On-line debt consolidation companies want you to do this. Consolidate your debt on-line with a company you know nothing about, are going to make monthly payments to, and have no way to track where your money is actually going.
Secondly, online debt consolidation says that it saves considerable time of the borrower which used to take a lot of time in locating a suitable lender. (Am I in a hurry when trying to find the best company to work with using MY money?) They tout that with just a few clicks of a mouse you can be on your way to a better and safer life. (Huh!) Third, they tell you that by doing this will save you from undergoing physical harassment. (What physical harassment are they talking about – the mafia in Chicago?)
Next, they want you to think that a single payment to them each month is the solution to all your problems. Any company you sign up with, is going to arrange it so you only have to make one payment each month, so why count this as a benefit? For their literature: “In the case of online debt consolidation, a single payment takes care of all the multiple debts of the borrower, instead of paying multiple payments. This condition makes it easier for the borrower to deal with high interest rate debts.” (Huh!)
Finally, all you need to do is make a pledge. If you are willing to pledge an asset (like your house?) then you are opting for secured form. (Danger…never turn unsecured debt into secured debt). The other option naturally is the unsecured option of debt consolidation does not require any asset to be placed as collateral. Under this option a borrower can avail sum of between $500 and $1,000 /month which can be easily repaid in a period of 6 months-10 years. (Can we narrow that down a little bit?)
The bottom line, stay away from on-line debt consolidation companies. They are just bad news period.