What You Need to Know About Debt Consolidation by cmlang


									by: Bill Thompson

Debt consolidation is often a last resort for people who are in extreme debt and trying to avoid
bankruptcy. Many people who are not in danger of bankruptcy, but have debt on high interest
credit cards may also choose to consolidate their debt. Debt consolidation is defined as the
process of organizing loans and debts into one low-interest loan that can be paid off regularly.
Consolidating debt can help someone avoid bankruptcy, and help them manage their money
more wisely. Debt consolidation is also convenient because it becomes easier to keep track of
debt and one is only required to pay off one loan rather than several debts. In order to consolidate
ones debt, collateral must be given. The collateral is usually the home, or a vehicle.

Central to debt consolidation is a debt consolidation company. It is important to choose the best
company to fit your financial needs. As is common in any financial sphere, there are reputable
companies, and companies that use underhanded methods to gain more money from the
customer. Most debt consolidation companies do use honorable methods, but it is still important
to know what some underhanded companies will do.

1. Some companies will wait until you are backed into a corner. If you know you are headed for
financial trouble and wish to consolidate your debt, make sure your company starts working on it
right away. Some companies will delay in debt consolidation so that the customer gets in more
debt and therefore has to pay the company more money in the long run as well as short term. A
customer who has to consolidate debt or else face bankruptcy can be forced to pay extremely
high refinancing fees or debt consolidation fees.

2. Some companies will also charge exceptionally high debt consolidation fees to people who
have high interest loans. Sometimes these fees can be extremely close to, or at the state
maximum for mortgage fees. It is important to know how much companies are able to charge
you, and compare that to what a company is offering. The lowest price is generally the best idea.
Always be on the look out for unnaturally high fees because some companies will attempt to
scam you.

3. Last, and certainly not least, you should be aware of companies practicing predatory lending.
Predatory lending is a practice by some unscrupulous companies to allow their customers to
become so in debt that no other company will help them. This is a way that a company can
control you and make sure to make significant financial gains from your misfortune. Any debt
consolidation service that attempts to control you is not a good service.

The decision to consolidate ones debt is a very important decision. It is important to understand
this fact when looking for a company. Knowing how companies will try to make extra money at
your expense is imperative to having a successful debt consolidation experience. Choose the best
company and you will notice a positive outcome. Debt consolidation is a wise option for people
with nowhere else to turn, but it must be a well-thought-out, educated decision.

This article was posted on September 10, 2005

To top