Before signing any debt consolidation loan, ask these 12 questions to confirm the company is reputable, understand your true cost, and identify any traps in the contract. The questions cover licensing, fees, terms, payment mechanics, and what happens if things go wrong. Reputable lenders answer all of them clearly; companies that dodge or evade are the ones to avoid.
Licensing and identity questions.
1. Are you a direct lender or a broker? Direct lenders make the loan; brokers refer your application to lenders. Both are legal. Brokers add a layer that can include fees. You want to know which you're dealing with.
2. What is your NMLS license number, and which states are you licensed in? Verify on nmlsconsumeraccess.org. Lenders are required to be licensed in states where they make loans.
3. Are you a lender or a debt-relief firm? Some companies advertise "consolidation" but actually sell debt settlement (which is a different product with different consequences). Confirm before continuing.
Cost questions.
4. What is my final APR including all fees? APR captures interest plus most fees. Get the number in writing before agreeing to anything.
5. Is there an origination fee? If so, how much, and is it deducted from the proceeds or added to the balance? A $20,000 loan with a 5% origination fee deducted from proceeds gives you $19,000 in cash; you owe $20,000. The same fee added to the balance means you receive $20,000 in cash but owe $21,000.
6. Are there any other fees I should know about? Late payment fee, returned payment fee, prepayment penalty, document preparation fee, application fee, etc. All should be disclosed in the loan agreement and TILA disclosure.
Term and payment questions.
7. What is the term length? Verify it matches what you requested. Lenders sometimes default to longer terms to lower the monthly payment.
8. What is the monthly payment, and when is the first payment due? Typically 30-45 days after funding. Confirm so you can set up auto-pay before the due date.
9. Is auto-pay required? Is there a discount for using it? Most lenders offer 0.25% rate reduction for auto-pay. Some require it for the best rates.
Payment mechanics questions.
10. How will the loan be funded? Direct to my bank account, or direct to my creditors? Direct creditor payoff (offered by Marcus, Best Egg, some others) is cleaner because you don't have to handle the payoff yourself.
11. If funded to my account, what's the timeline for funds to arrive? Typically 1-7 business days. Same-day funding sometimes available for current customers.
What happens if things go wrong.
12. What happens if I'm late on a payment, and what hardship options do you offer? Late fees, reporting timing (typically reports late at 30 days), forbearance options, hardship programs. Lenders with established hardship programs are more borrower-friendly than those without.
Bonus questions for HELOC and cash-out refinance.
What are my closing costs, and can I see a Loan Estimate? The CFPB Loan Estimate document for residential mortgages is required and standardized.
What is the loan-to-value ratio after this loan? Above 80% LTV is high-risk; above 90% is very high.
Is the rate fixed or variable? If variable, what index, what margin, and what cap?
Is there an early-closure fee for the HELOC? Common in years 1-3.
Bonus questions for HELOC, cash-out refinance, or auto cash-out specifically.
What happens if my home value drops below the loan amount? Some lenders can call the loan or freeze further draws.
If I sell the home, what's the payoff process?
Questions about the company's track record.
How long have you been in business?
What is your BBB rating and complaint history?
Can I see customer reviews on Trustpilot or similar?
What is your customer service availability (hours, channels)?
How do you handle hardship requests during the loan term?
Questions to ask yourself before signing.
Does the APR beat my weighted-average existing APR by at least 4-5 percentage points?
Can I sustain the monthly payment for the full term?
Have I read the loan agreement, including the fine print?
Have I checked the company's licensing and complaint history?
Do I understand what happens if I miss a payment, prepay, or default?
Does the loan address my underlying spending pattern, or am I just rearranging debt?
Red flags in their answers.
Refusal to disclose APR or fees in writing before signing. Illegal under TILA. Walk away.
Pressure to sign immediately. Reputable lenders give 24-72 hours to review.
Demands for upfront payment before loan funds. Always a scam or red flag.
Vague answers about whether they're a lender or broker. Direct lenders are clear about their role.
Refusal to provide an NMLS number. All licensed lenders have one. No NMLS = not a licensed lender.
Different terms verbally vs. in writing. Get everything in writing.
Documenting the conversation. Take notes. Save emails. If a representative tells you something verbally that contradicts the written documents, get the written confirmation before signing. Verbal promises don't bind the company; the contract does.
What to bring to the conversation. Current credit report. List of debts to consolidate with balances and APRs. Most recent pay stubs. Bank statements. Existing loan agreements for any debts being consolidated. The notes from your previous lender pre-qualifications for comparison.
Print this list, take it with you, and don't sign until every question is answered to your satisfaction. The five minutes of asking is much cheaper than discovering a fee or term you missed after signing.