If you’re struggling with debt, you may be tempted to sign up for a debt management program. However, it’s important to watch out for scams! There are three common types of debt management scams that you need to be aware of: debt settlement, debt consolidation and advance fee scams. Read on so you can recognize and avoid these scams.
What is a Debt Management Scam?
Debt management scams often prey on people who are in financial distress and struggling to make ends meet. The scammers promise to help consolidate your debt or negotiate lower payments, but instead end up stealing your money. They may even guarantee that they can get your debt reduced or eliminated. The scammers will typically ask for an upfront fee before they do anything to help you. These scams can be difficult to spot, as the scammers are often very convincing. They may even use scare tactics, such as telling you that your debt will be sold to a collection agency if you don’t act now.
Watch Out For These Types
Debt Settlement Scams
Debt settlement scams usually involve a company promising to negotiate with your creditors to lower your debt. However, these companies often have no intention of actually doing this. They will typically charge you an upfront fee and then keep the money for themselves. In some cases, the company may even contact your creditors and tell them that you’re going to stop making payments. This can damage your credit score and put you at risk of being sued by your creditors.
Debt Consolidation Scams
Debt consolidation scams involve taking out a new loan to pay off your existing debt. However, the terms of the new loan are usually much worse than your current debt, and the fees and interest rates are often exorbitant. In addition, the scammers may encourage you to use your home equity as collateral for the loan. This puts your home at risk if you run into challenges in making the high payments required.
Advance Fee Scams
Advance fee scams are also common in the world of debt management. These scams usually involve a company promising to help you get out of debt in exchange for an upfront fee. However, these companies often don’t deliver on their promises and you end up even deeper in debt. If you’re ever asked to pay an upfront fee to enroll in a debt management program, beware!
If you’re struggling with debt, it’s important to be aware of the different types of scams that are out there. By knowing what to look for, you can avoid becoming a victim of one of these schemes.
To learn more about other types of financial scams, visit our financial purchase scams page.