Consumer debt. It's a fancy word for all that money charged to your credit card(s) you can't seem to pay off. And it's no wonder. With interest rates above 19%, how could anyone hope to get their head above water?
The general idea of debt consolidation is to save you money and get you out of the red. There are 2 common ways to consolidate debt. Either you an hire a debt consolidation service to pay your bills and pay them one monthly fee. Or you can take a debt consolidation loan against your home or car to pay off your high interest debt and save yourself some cash. However, if you don't have a home or a car and you have less than perfect credit, then it's nearly impossible to borrow money to pay off your debts. At this point, most people turn to debt consolidation services.
Debt consolidation services seem to offer you a way to scrunch up all your debt into one easy payment. They also scrape years off of your payment plan. However, there are a lot of scams in the debt consolidation industry. So, you need to be aware of them before they cost you.
The hidden costs
Debt consolidators like to throw in hidden fees for their services that can amount to 10% of your monthly payment or more. They pocket this extra money as payment for their services. So while they are telling you that you have just shaved 24 years off of your debt repayment, you could probably shave off several more by simply doing the payments yourself.
The late payments
If you've got bad credit, making late payments is a great way to make your credit rating even worse. You would think that by entrusting your payments to a company whose job it is to make your debt payments for you, those payments would be made on time. But many times they are not, and you suffer the consequences.
The high interest rates
Many debt consolidation companies stick you with 20 to 25% interest rates, but don't make that clear to you. In the end, you're paying more interest with the consolidation company than you were with the credit card company. The way they slip this by you is by lowering your monthly payment, but making you pay more money to them over the long-term. This extra money is simply lining their pockets.
So what do I do to get out of debt?
The best way to get out of debt is to go to debt counseling and look at your options. There are home equity loans, personal loans and cars that can be refinanced to give you some extra cash. You can also call up credit card companies and talk to an associate authorized to lower your interest rates. Many debt consolidation services offer this service, but the truth is you can do it yourself.
While you may need to get a debt consolidation loan, it is possible that some adjustments to your lifestyle. If you make paying off your debt a priority, then you will be able to do it. If you need some help figuring out what to do about your debt, check out these debt counseling services for help and guidance:
After speaking with a debt counselor, you may find that a debt consolidation loan is what you need to conquer your debt and be free. If that is the case, make sure you speak with them about your best options and ways to avoid scams. If possible, get a home equity loan or a personal loan from a bank in your area. This will help to keep your interest rate low and keep you from paying more than you need to.
