In case being in debt wasn’t stressful enough, you need to worry about debt consolidation scams, pitfalls and traps along the way as well. Debt is something that the average American racks up in one way or another, whether it’s student loans, credit card, or home payments. Our system makes it very easy to add to our debt without providing us with a blueprint or roadmap along the way. The more debt you earn, the more money you’re paying to institutions at the same time. It’s a win for them, and a loss for you. However, you can turn this around by refinancing or consolidating your debt, getting more favorable terms for your new loan and saving money along the way.
Debt Consolidation Scams
If you’re serious about consolidating debt in 2018, you need to do a little homework first. Here are 4 debt consolidation scams to carefully avoid along your debt repair journey:
1. Failing to Research
Everything requires extensive research today. Just because you see a promise or a headline doesn’t mean it’s true. There are multiple ways to consolidate your debt, and you need to consider the pros and cons. You may commit to a secured or an unsecured loan, transferring outstanding debt onto a new or existing line of credit. You could consider pooling your debt on a balance transfer credit card. All of these options have pros and cons that are specific to each individual situation. Don’t forget debt settlement and debt management plans, each equipped with their own hidden fees and unforeseen expenses. Do your homework so you’re absolutely certain.
2. Ignoring the Cause
There’s a reason you’re dealing with a mound of debt right now. There’s a problem that has gone unnoticed and unaddressed for too long. People often turn to debt consolidation because their spending gets out of hand, and they can’t manage the repercussions. Do not gloss over your previous actions. Face them head on and seek professional help in restructuring how you do things. Perhaps you spend too much on housing, car payments, and living costs. You need to evaluate a new plan that balances all of these expenditures without adding to your debt.
3. Consolidating Wrong Debts
Many times, if you’re staring down debt consolidation, you probably have multiple debts strewn all over the place. When you go into debt consolidation mode, you want to eradicate all of the debt at once. It seems to make the most sense, right?
If you aren’t careful, you might even roll in low interest credit cards so you’re paying higher interest as a result of the convenience of that one consolidated debt account. You are better off consolidating high interest debts and leaving out the low interest, low balance debts to pay off separately.
4. Using Cards Too Soon
Consolidating will feel incredibly cathartic for you, washing you of the debt that strangled your life. However, using newly freed up credit on your once maxed out credit cards to spend again isn’t exactly the answer either. Just because your debt has been consolidated, that doesn’t mean you have a clean slate. You still have a considerable amount of debt.
Debt Consolidation Scams : Conclusion
The New Year is a great time to get a hold of your finances. However, Rome wasn’t built in a day. Have patience, do your research and compare lenders.