Debt Consolidation Could be a trap

January 28, 2010

debt consolidationYou’ve probably seen the commercials on TV or heard them on your radio.  A debt consolidation company offers to help you settle your debt for pennies on the dollar.  But watch out, these companies could just make your money problems even worse.

Consumer advocates warn that debt consolidation company promises are often too good to be true. Many of the companies charge large up-front fees in addition to monthly payments and a percentage of your debt — all for services that can ruin your credit score, result in a onslaught of collection agency calls and leave you with tax obligations. In many cases, consumers pay thousands of dollars only to find themselves in worse financial shape than when they hired the debt consolidation company.

Click here to read more from business columnist Kathy Kristof of CBS MoneyWatch.