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Three Debt Consolidation Mistakes to Avoid

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					Three Debt Consolidation Mistakes to Avoid




When in search for a solution to extreme debt, it is easy to get enticed with the
promise of relief through debt consolidation. But debt consolidation is not a
magical potion which can erase all your debts in an instant. The truth is, debt
consolidation is merely the first step and in order to successfully make your way
out of debt, you need to follow a strict repayment program.

Choosing the right debt consolidation is also another challenge. There are many
offers in the market but not all of these offers are worth signing up for. Predatory
lenders or unscrupulous debt consolidation companies are after only one thing –
to make money out of other people’s expense. If you’re not careful, you could be
stuck in a debt consolidation loan packed with excessive interest rates, high fees
and unreasonable terms.

So how can you avoid being a victim of debt consolidation rip-offs and scams?
Check out the following mistakes that must be avoided should you decide to
consolidate your debts.

   1) Not considering the costs.

    How much will it cost you to consolidate? If you need to take out a loan to
   pay multiple creditors, you are more likely to have less than perfect credit
   reports score. A low score can be a major problem. Of course, if you poor
   credit, creditors may charge you with higher interest rates and fees on account
   that you are a “high risk customer”.
If you plan to consolidate, you need to seriously consider all the possible costs.
Your monthly fees may considerably be reduced, but in the long run, you could
end up paying more on interest rate charges.

2) Paying someone else to distribute your payments on your behalf.

Don’t be fooled by the promise of quick debt relief by signing up for debt
consolidation. Some debt consolidation agencies may promise to reduce your
debts by negotiating with your creditors and taking over the distribution of
your payments. You will need to sign up with their program, and submit your
monthly payments to your debt consolidation agency, who will distribute your
payments to your creditors.

What’s the catch? You pay an extra fee to your debt consolidation agency for
doing you a service that you might as well do on your own. Why pay an agency
to help you distribute your payments when you can do it yourself at no
charge? You can even do your own negotiation with your creditors.

3) Transferring balances at a high price.

Some people who are stuck in credit card debt may get a low-interest balance-
transfer credit card, and transfer all their balances from their high rate cards.
Nonetheless, some balance transfer cards impose relatively high transfer fees
which means you are charged with an extra cost each time you transfer a
balance. Even worse, the low interest rate may only be applicable for a few
months. When the teaser rate period ends, you might find yourself left with a
large balance charged with an extremely high rate.



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Description: So how can you avoid being a victim of debt consolidation rip-offs and scams? Check out the following mistakes that must be avoided should you decide to consolidate your debts.