For someone who wants to get out of debts fast a debt consolidation can be very appealing. The lower interest rate on some of the debt and the lower monthly payment is what lures people in. the truth behind it the lower payment is not because you are actually paying for lower rates but because the term of the loan is extended. The longer you pay for the debt the more you pay the lender and the more profit they get thus the reason why they are in the business of debt consolidation.

Borrowing from these lenders can be a sensible move at times and could be your ticket to financial freedom but you have to be careful which company you will trust. There are some key indicators of debt consolidation companies that you should avoid. If a company promises you with a hard money loan that’s easy to get then don’t buy it. They may end up charging you higher interest rates than what you are actually paying now. When computed, interest rates can be as high as 21% or 22%.

You should also try to stay away from companies who promise to take care of everything. If they promise to negotiate lower interest rates, reduce monthly payments and all that’s left to do for you is make one easy payment then you may want to think again. Truth of the matter is many debt consolidators put in a fee as part of the monthly payment that you make. The charge is about 10% of what you are paying. Another risk is that some consolidators are known to make late payments and sometimes even late payments which can be a burden to you and your credit record.

Also try to avoid balance transfer as much as possible. There are a lot of offers for balance transfer cards that have low interest but they are only offered for a couple of months. After the promo months, they will be back to being high interest cards again. So if the debt consolidator offers you to balance transfer from one account to another, reconsider it and make sure that if you decided to transfer the account, it is closed as per customer request so it won’t appear that the creditor closed your account.

The best debt consolidation moves for you are taking home equity loan, cash out refinancing, refinancing your car, getting a personal loan or negotiating for better terms. The advantage of a home equity loan is that you will only be paying for a low interest rate at the same time the interest payment is tax deductible. Negotiating better terms is something that you can do yourself. All you have to do is call your credit card company and ask them to reduce rates and negotiate your terms of payment. You don’t have to pay others to do it.

For the most part debt consolidation offers a positive solution for those who want to get out of debt but if you fall into the hands of the wrong debt consolidator, you may end up being in debt for the majority of your life. So before deciding which consolidators to trust, do your research and find out more about it.