The Biggest Myth About Debt Consolidation Loans Is That They Are Easy To Get

Category: Finance, Credit.

If you are in debt up to your eyeballs, the fantasy of debt consolidation sounds wonderful and can suck you right in. When someone has outstanding debt, the convenience of having everything all rolled into a single package sounds like the perfect idea.

It would be great if someone had the power to shrink your debt into one little package and shrivel that debt into only one hundred dollars or so. Before you opt for this option, it is important to know the serious risks that accompany these consolidation loans. Now if you really need a loan, it s because you re in trouble financially and your credit history most likely isn t the greatest. The biggest myth about debt consolidation loans is that they are easy to get. The consolidator may entice you with promises of an easy- does- it loan and end up charging you higher rates than you pay now. Another problem with these types of loan companies is how they negotiate with your money to help you get out of debt, yet make a living for them doing so.

Yes your monthly payment may be lower, but you ll end up paying more due to the extended time of the loan and the higher fees. Many consolidators build in a fee as part of the monthly payment you make to them. They pass along your payment to the creditor and get back a 10 percent to 15 percent slice that the relieved client( YOU) is only too happy to rebate to the consolidator for all of their assistance. That fee is usually about 10 percent of the payment. Another problem is those who are in deep debt have the impression that a single loan looks better on their credit report. This is because a key portion of your score is the length of time you have had with your opened accounts. Yet this usually proves differently.

First, is it worth paying someone else to do what you can do on your own? National Foundation for Credit Counseling has branches throughout the country. There are things you can do such as call and negotiate lower interest rates, stretch out your repayment schedule and pay off the highest- interest debts first. They are a non- profit community organization that provides free and confidential debt management service to anyone who needs it, even over the telephone. I believe it is a good alternative to try before heading off to one of the many consolidation firms sprouting up all over the country.

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