Debt Consolidation Promises That You Should Avoid
- By Tim Long
- Published 08/4/2011
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.
Tim Long is a 40 yr old Briton, medical laboratory technologist,resident in the West African tropics for the past 7 years. He has a deep passion for writing on all topics of human endeavor and general interest and also loves traveling, fishing, dog walking and new technologies. He is happily married with two lovely daughters, Aurora and Jasmine who live in England with their mum. Tim Long can be reached on 234803454358
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