|
All too often debt consolidation loans are marketed as the great panacea. The lenders would like you to believe you can get one of these loans and all your financial trouble swill be eliminated. Sadly, it’s just not that easy. Although it would be great if a debt consolidation loan would solve all your financial problems, in reality these loans are nothing but another tool you can have in your financial toolbox.
Here are some of the things you want to avoid when you’re getting or considering a debt consolidation loan. The first thing you should do is make a list of all your debts, their interest rates, balances and monthly payments. This is a first step that will help you determine if one of these loans can help you on your way to debt freedom, or be just a short term patch for a long term problem. You don’t want to stick you finger in a leak, only to have the boat sink around you. Debt consolidation problem to avoid number 1 – the bad loan. Its’ sad but sometimes you are just not going to be able to get a good loan. If you can’t, just walk away. Unfortunately many people won’t just walk away from a bad consolidation loan. They get sucked into the whole idea that consolidating can solve their money problems, but in many cases the loan will have a special, low introductory rate, or pack the loan with fees that will make you total of payments much too high. The way to avoid this is to analyze all the terms and conditions in the loan documentation, something too few people take the time to do. Debt consolidation problem to avoid number 2 – Balance transfer bait and switch. While not actually either bait and switch or a debt consolidation loan, responding to any of the 5 to 10 balance transfer offers that come spilling out of your mailbox any given day of the week could land you in financial hot water. What many consumers don’t know, and find out too late is that many of these offers are part of the lender’s profit plan; an integral part. With the bad credit mortgage problems, lenders are looking for other profit centers, and an area that has very high profits is the balance transfer arena. There are two things to look out for here. One is the “teaser” interest rate, where an artificially low interest rate sucks you in, but is raised substantially after the introductory period. The other is the high annual fee card. Some of these credit cards have huge annual fees. Thos are cards you should avoid at all costs. There are a few things you can do to help alleviate your credit woes and reduce your debt more quickly. First call your credit card companies and see if they’ll lower your interest rates. Don’t laugh, it actually works, especially if you’ve been religious about paying your bills on time every month. Next, see if you can transfer balances from one of your higher interest cards, to your lower interest ones. Check with your credit card company to see if you can get a more favorable rate on a balance transfer. Don’t go out and get a new card just to transfer the balance to however. You could wake up one day with just another maxed out, high rate card. The one thing that is important beyond everything else is to get your spending under control. Just as eating more than you burn off will render you fat, spending more than you make will cause you to be poor and in debt. There’s nothing else that need be said in this area. You need to make a budget and stick to it. Only then will you be able to pay down your debt. A debt consolidation can be a valuable tool, but it must be realized that the long term of these loans can cause you to pay substantially more in total dollars than paying the higher interest rate for a shorter period. Discover the secrets that can save you big money every month, now and in the future. Go to the debt consolidation loan secrets guide. |
