|
|
Concerning Debt Consolidation
The following debt-consolidation moves are not
advisable:
1. The hard-money loan...
Debt-consolidation loans are never easy to get. The debt
consolidator may tempt you with promises of a lower rate
loan, but end up charging you higher interest rates than
you are paying now, as high as 21% or 22%. Your monthly
payment may be less with one of these loans, but you
will ultimately owe more.
2. Debt consolidators who promise to take good care of
you...
Buyer beware! Debt consolidation companies claim to
resolve all of your debt woes by negotiating lower
interest rates, reducing your monthly payments by
expanding your repayment schedule, and paying off the
higher interest debts first, resulting in one simple
payment. Subsequently, a good number of debt
consolidators tack on a 10% charge as part of the
monthly payment which they send to the creditor. The
payment can be debited directly from your checking
account, 10% to 15% of which in many instances is
rebated to the consolidator by the creditor. So before
signing the dotted line, and often not before they
frighten the heck out of you while passing themselves
off as the ideal solution, is it worth paying someone
else to do what you can do on your own??? Not to mention
consolidators have been known to make late payments or
even miss payments in some cases, casting an even darker
shadow on one's credit record.
3. The balance transfer vice...
Low interest balance transfer credit cards are
commonplace anymore. Just remember that those lower
rates are only temporary before having to transfer
balances again. The bad thing is that eventually, all of
this activity pops up on your credit report making you
begin to appear to be a bad risk. When it happens that
you're turned down, and you will be at some point,
you'll be stuck with the high interest card you were
planning to get rid of. Balance transfers should be
treated as a temporary fix, then when it comes time, you
should formally close the accounts yourself. Follow up
by notifying the credit card companies to mark the
account closed at the customer's request, or your credit
report will look like the creditor closed your account.
This will damage your credit history even more, in spite
of your sincere efforts to get out of debt.
INSTEAD, consider doing any of the following:
1. If you own a home with some equity in it, consider
taking out a home equity loan.
It has the advantage of carrying a fairly low interest rate, and any interest that you pay is
tax-deductible. The majority of fixed rate loans carry a
15 year term involving an origination fee of $75 to
several hundred dollars in addition to the cost of an
appraisal and title insurance.
2. Do a cash-out refinancing which is another option
for those with equity remaining in their home.
Refinance the property for greater than the amount still owed on
the existing mortgage and utilize the extra cash to pay
off some debt. Taking advantage of the low interest
rates may provide some relief initially, but the total
interest cost over three decades adds up, so treat this
as a one time only solution.
3. Refinance your car.
It's considered to be a secured
loan and you can borrow against it. However, you may run
out of car before you run out of debt. It's tough to buy
a new car when you owe more than it's worth.
4. Get a personal loan.
If you have reasonably sufficient credit, you might qualify for an unsecured
loan. Credit unions normally offer lower rates than
banks, but even in this case you can expect an interest
rate of 11% or more. This option is still better than
paying the 20% plus credit card interest you're now
paying.
5. Negotiate reduced rates which you can easily do for yourself.
Just ask for customer service when calling the
credit card company and ask them to do it right there on
the phone.
6. Still another alternative is to seek assistance from
an organization like NFCC.
Or National Foundation for Credit Counseling which has
branches throughout the U.S. They are a non-profit,
community organization that provides free and
confidential debt management counseling to anyone who
needs it, even over the phone. Like other debt
consolidators, NFCC gets paid by creditors,
so it's in their best interest to work out a debt management
program rather than advise you to file for bankruptcy.
Not that you wish to be advised to file, but in certain
instances bankruptcy may be your best solution. Contact
them about the possibility of qualifying for their low
rate mortgage program in addition to their low cost
financial planning.
How are debt consolidation companies helping consumers?
Debt consolidation companies have gained increased prominence owing to the fact that they have helped many debtors to become debt free.
Debt consolidation is undoubtedly a good debt solution but you have to play your part too. Once you enroll for a debt consolidation program,
it is important to take the process to completion and not leave it midway. You seek professional assistance only when you are in a financial
mess. There are times when you don’t mess up your finances but your circumstances force you to. Under such circumstances you can take
help of a credit counselor who can suggest ways to regain financial stability again. When you consolidate your multiple debts into one with
the help of a debt consolidation company, the firm you are hiring will take care of your debts. The company will negotiate with your creditors
on your behalf and convince them to reduce rate of interest. If the interest rate is reduced, the amount you are paying each month is also
lowered. You will also get a repayment schedule that will enable you to keep track of your payments and your payments become more organized
and structured. The debt consolidation companies may be for-profit or non-profit making firms. Once you enroll for a debt consolidation program,
make sure you don’t miss your payments again. This can be very troubling and can land you in serious trouble. Studies reveal that approximately
30% to 60% debtors in United States don’t repay their debts. However, lately there are many
debt consolidation companies that have come under the spotlight.
And this time due to the wrong reasons. The Federal Trade Commission, state regulators and attorney generals have received several
complaints from the consumers that there are few debt consolidation companies that are taking debtors for a ride. These debt help firms promise
you that they will be able to help you get out of debt but in reality they fail to live up to their promises. In majority of the cases, it has
been observed that debt consolidation firms charge very high upfront fees; they make verbal promises and avoid writing down their services in paper.
The incidence of debtors dropping out of the program isn’t uncommon and when they do so, debtors lose all their cash. However, not all
debt consolidation companies operate illegally and if you intend to hire the services of a debt consolidation company, make sure you check the
Reliability report of the
Better Business Bureau.
|
|
|
Home |
Debt Reduction |
Debt Consolidation |
Debt Settlement |
Bankruptcy Reform |
Chapter 7 |
Personal Websites Links |
More Links
c2008
Debt Less 4ever .com Getting out of Debt Resources and Debt Relief Information
CLICK HERE ABOUT INCLUDING YOUR BANNER OR TEXT LINK ON THIS SITE
debt consolidation, debt management, debt settlement, debt reduction, debt relief, debt counseling, debt help, credit counseling, debt freedom, credit repair,
credit help, debt elimination, credit restoration, debt recovery, debt cures, bankruptcy information, bankruptcy laws, chapter 7, chapter 7 bankruptcy,
chapter 7 bankruptcy information, chapter 7 bankruptcy rules
|
|