No matter how many debt consolidation infomercials have you come across; know for a fact that consolidation is a tricky subject, which if not handled properly, might lead to consequences as dire as that of multiple loan default. The adverts might claim that you would be debt free in a jiffy if you’re opting for these loans but there is still a lot of thought to be put into— before you’re opting for consolidation services. Scams perhaps are a major concern in this regard.
The Scams
Much as online transactions have added to our convenience, they have acted as immediate catalysts for scamsters or scammers as well. There are fake websites with absolutely professional look that can put you in trouble in this regard. They generally require very little in terms of credit status and when you provide your personal information to them, they quickly pass them on to the fraudsters. Thus after a year or so you start receiving calls from debt collectors that they would sue you if you do not repay the loans. This happens, irrespective of the fact, whether you have taken out the loans or not. Those looking for student debt consolidation should straightaway head for the Department of Education, giving all other companies, providing debt consolidation services a miss.
The Misunderstanding
Most of you out there are often confused between credit counseling and real debt consolidation loans. Now, generally the adverts that you come across are that of credit counselors and not consolidation loan providers. They work with your creditors to lower the rate of the interests and repayments and do not pay off the entire loan that a “consolidation” does. Consolidation actually helps you with a new loan so that you can pay off all your existing debts. You, moreover, are put on a fixed repayment plan with a clear idea of when you get rid of this new loan.
Consolidation is not the only answer to all your woes
There are experts who suggest that there is not much that consolidation does which you yourself can’t do to make the situation better. Consolidation might help you with an easier repayment option (with a lower rate of interest and easier way to track your payments since you’re down with s single payment instead of several ones). But the tenure of repayment might be longer which might ultimately lead you paying up more in the long term. So the options which you can consider are:
- Shifting your big loan to a low interest or zero interest credit card debt
- Getting an unsecured line of credit
- Taking out a home equity loan
Know for a fact that debt consolidation might pose serious problems if you are putting your house on line. For instance, you are using cash out refinance or home equity loan while consolidating your existing debts you are clearly putting your home at stake. The lender might as well have full authority to take away your home in case you fail to repay your loan.