Debt consolidation is said to be one of the most common methods adopted by people who are overloaded with multiple unsecured debts. But before getting excited about finding out an easy solution to your debt issues through debt consolidation, consider some critical issues. There are debt consolidation companies who prey on such vulnerable consumers in financial distress and take an undue advantage of them. So have a look at the 3 debt consolidation traps to avoid.
- 1.The ‘0% Balance’ transfer card:Often debt consolidation companies offer this as a solution to your overwhelmingly large debt issues. They ask you to transfer all your debts to a ‘zero percent balance’ transfer card. Such cards must look great but they are indeed a debt consolidation trap which you got to avoid. This ‘zero percent’ is actually the interest rate for an introductory period which generally lasts from just six to twelve months. If you are able to pay off the balance within that period, then only you will enjoy the benefit of a considerably low interest rate. Otherwise, you will be subject to high interest rates which may bring you to a worse situation.
2.The easy loan which actually extends the term:
The debt consolidation companies will promise to make your qualification easy for a debt consolidation loan. A debt consolidation loan is a loan taken to pay off the other debts. Usually the debtors are provided the benefit of low interest rate loans so that consumers with bad credit are tempted to take the ‘easy loan’. But you must be aware of the fact that with low interest rates, your monthly payments decrease, thereby increasing the term of the loan. So, this way, you end up paying a huge interest rate throughout the term of the loan.
3.The easy call that is chargeable:
Your debt consultant will charge you for the negotiation that he will do with your creditors. In a debt consolidation program, your debt consultant will negotiate with your creditors to lower the interest rate and monthly payments on your loan. They will charge you for this negotiation. But this is a process that can be easily done by you to save the extra money. You just have to contact your creditor and request for lowering your interest rate. Most creditors will accept this to keep you as a customer.
It’s easy to get tempted by apparently attractive debt consolidation offers, but it is wiser to cross check the traps that are generally involved with debt consolidation services. Avoid these traps to save those extra dollars.