14 October 2017

How Not To Fall Into The Traps Of Debt Consolidation

We can never deny the fact that debt consolidation has helped so many people pay their debts, get back on their feet, and start anew. The fact that this process combines multiple loans into one with a lower interest rate or monthly payment, and a longer payment term makes it easier for people to manage and eventually settle their debts.

However, it is essential to remember that this process comes with some risky procedures or pitfalls that may make your financial situation worse. Here are some of the common debt consolidation mistakes to avoid.

Common Mistake # 1 ? Believing what seems too good to be true

How Not to be Trapped ? Avoid unscrupulous companies

People who are knee-deep in debt are prone to be desperate. In fact, they can be desperate enough to believe just about anything that they hear. But the rule here is that, if something sounds too good to be true then it probably is. Avoid scams and shady and rip off companies by choosing a legitimate debt consolidation company. How do you this? Do a background check! Online you will find various resources such as web forums that discuss debt consolidation companies and their services.

You can also call up the Better Business Bureau to find it the company is a member and it has any listed customer complaints. It is also best to avoid companies that pressure you into consolidating your debts. A genuine company would tell you honestly if this is the best option for you or not and offer you valuable advice as to how to alleviate your existing financial situation.

Common Mistake # 2 ? Losing your home

How Not to be Trapped ? Avoid using your home as collateral

This is of course, unless you can be 100% sure that you would be able to pay your monthly dues on time. But as you probably know, nothing in this world is guaranteed. Even if you promise to make the payments on time, you can never be sure what is bound to happen in the future so as much as possible avoid using your home as collateral. Try other alternatives such as unsecured debt consolidation loans, debt consolidation loan with bad credit, and so on. Getting professional advice would help determine what the best option for you is.

Common Mistake # 3 ? Ending up with a debt consolidation company that charges high fees

How Not to be Trapped ? Shop around and do it wisely

Never go with the first company that you see in the financial market. Chances are, there are other better options out there and you can always go back to the first one in case you cannot find any better deal. Do a comparative shopping by gathering three to five companies and listing down all their offerings and products. Be sure to include the interest rates, monthly payments, payment term, and other charges and fees so you can be sure to end up with the best deal.

Debt consolidation loans are surely helpful in making your debts more manageable but these loans do come with some risks that you should know about so you can avoid them and use debt consolidation to your advantage.