| Bad Debt Consolidation Is Quite Like A Fairytale. |
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| Written by Graham McKenzie |
| Thursday, 17 December 2009 13:27 |
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Somehow, there is someone out there that can take all your debt and put into one easy payment while lowering it at the same time. By doing this, you are supposedly going to save money somehow. Bad debt consolidation loans are not as great as you might think.
Somehow, there is someone out there that can take all your debt and put into one easy payment while lowering it at the same time. By doing this, you are supposedly going to save money somehow. Bad debt consolidation loans are not as great as you might think. Those who are struggling with debt often hope that the promises are real. Think about all the businesses that boast these offers. Advertisements and mailings are visible everywhere for consolidating debt. They tell you that debt relief is a simply click away, or cut your payments or interest rates in half. No one wants to be in debt and these companies know that. So, they offer to help you get out of debt which is very tempting but there are several facts that you need to know before you take this route. Avoid the three negative choices most people make. Getting a consolidation loan is not the best choice. The interest rates are very high. While your payments might seem lower, it is going to take longer to pay it off. Bottom line, you end up paying more over all. Consolidation companies claim to take the hassle out of dealing with creditors. As stated before, they claim to decrease interest rates and your payments. There is one catch. You have to pay a small fee upfront and they claim it is a one time fee. For the most part, your monthly payment includes a fee that you will pay to them. It is about 10 percent of your payment. They make your payments and receive 10 to 15 percent back from your creditor. Why should pay them when you can negotiate with your creditors for free? Creditors are known for threatening debtors. Knowing this, you probably do not want to deal with them but, think about it this way. If you talk to several consolidation companies, you will find they all offer the same thing. Here is the kicker though. They tell you that it can take 32 years for you to pay off your debt on your own. They offer to cut that time down to 4 and half years. Look for a financial calculator on the internet. Get a calculator or find one on the internet and put in the numbers. You are going to find that you can pay off your debt faster on your own. Debt consolidation companies also have a reputation for missing payments. Isn't that what you are trying to stop? The final bad move is the balance transfer. They pull you in by offering low interest rates. The problem is that these interest rates are only for a set amount of time. So, in order to keep a low rate, you have to switch again. All this activity looks bad on your credit. If you make this choice, contact your credit card companies yourself and have them closed out at your request. Make sure to that they mark the account as closed at customer's request. Some good options for paying off your debt are listed below. You can apply for a home equity loan. They offer low interest rates and the interest is tax deductible. Another choice for those with home equity is to refinance the property for more than what you owe. You can use the extra money to pay off your debt. Alternative options are negotiating, personal loans or refinancing your car. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Layla Vanderbilt is the webmaster for a leading website that offers for debt consolidation advice and guidance. |