Debt consolidators usually attract positive
attention at the start because they give the impression that they will neatly
arrange all your debts into an organized and even lighter one. Their campaigns make debt relief seem to be
so straightforward. They will just
consolidate all your bills and convert the interest rates to as low as 0%. Unfortunately, people who have fallen prey to
them have experiences worse than the opposite of these empty promises.
Normal tendency when experiencing financial
crisis is to get loans to cover up for previous credits. This being a well-known phenomenon, debt
consolidators do their best to entice people into these types of situations
with debt consolidation loans which promise easy and immediate processing and
approval as well as lower monthly payments and interest rates. Being close to desperation, people tend to
become easily lured by such and grab them without a second thought.
If these people only compute how much they
actually pay in totality, they would be surprised when they learn that it is a
lot higher. Sure, the monthly payments
are lower but this is mainly because they are spread over a longer period of
time. What are usually unnoticed are the
interest rates that are, in fact, higher.
In most instances, rates go as high as 21% or 22% and these subtly and
discreetly wring people dry while burying them deeper into a financial rut.
Debt consolidators also assure customers that
they will be in charge of everything.
They will apparently coordinate with your creditors. All that is left to do is make one easy
payment every month. However, what
happens in reality is that they actually charge for such service by taking hold
of about 10% of payment given monthly.
This is about $50 for every $500 monthly payment. Instead of such amount being used to
significantly reduce debt, it automatically goes to the deceiving hands of debt
consolidators.
Most of their services are obviously those that
you can do on your own given the right information. You yourself can negotiate with your
creditors to make payments more manageable in the light of a current financialdifficulty. You need not shell out such
a large amount for that. Most creditors
are willing to bend a little but only if they are aware of the circumstances.
What makes doing the negotiations and payments on
your own a lot better is that certain cases have already been reported where
the debt consolidators themselves are making late payments. They regularly ask the payment from their
customers but they remit them late thus causing the customers more charges which
they are not made aware of. This will
only be added up to the monthly payments unnoticed.
Balance transfer cards are also prevalent
nowadays, which are usual debt consolidation tools. Just the same, they promise lower interest
rates. However, you have to take note
that such low rates aren't going to be the case forever. After a few months, they will increase. Of course, when that happens, you will look
for another provider. The network of
credit companies sees this kind of activity and considers you as a risk
thinking that something else is behind your switching. Thus, your switching may not be approved and
you are left without a choice but to hold on to the card and suffer with its
high rates.
It is obviously wiser to think of other options
instead of resorting to the services of debt consolidators. Home equity loans, for example, are better
options because of their single-digit interest rates, which are even
tax-deductible. In such cases also,
since you do have a home equity, your property may be up for a higher amount ofrefinancing. In turn, you can use the excess
money to settle your debts. You may also
try personal loans especially if you used to have a good credit history. The interest rate may still be high, around
11%, but this remains a better alternative as compared to the 20%++ rate of
debt consolidators.
There are several other options that you can try
out. If you want to know more about
them, you can seek advice and gather information from certain organizations
providing credit counseling. Once you
have the information that you need, you deal with the situation yourself. Most debt consolidators have already been
proven to be unhelpful thus should not take part in your alternatives
anymore. You need not worry about being
exposed to harassment, as there are laws such as the Fair Debt Collection
Practices Act to protect you.
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