Guest Post: Sharon Smith ( findsharonsmith@gmail.com )
Here are a few things that you need to watch out for, before applying for a debt consolidation loan:
“Knowledge is more powerful than money”
With the help of knowledge, you will be able to find a way out of almost anything…debts, too.
Did you know that an average American carries around 4 credit cards? Managing around 4 credit cards can be a rather overwhelming job.
How to manage your credit card debt? Is debt consolidation the best way to get out of debts quickly? Let’s find out.
Do not consider a debt consolidation loan as a quick-fix solution to your debt problems. Only one payment, that too, on a lower interest rate sounds very attractive. However, it should only be considered as an alternative to bankruptcy.
Here are a few things that you need to watch out for, before applying for a debt consolidation loan:
If you are consolidating debt, check the company’s listing with the BBB. See that, the company has no complaints listed against them.
Some debt consolidation firms decoy you with low rate of interest and lower monthly payments, only to stretch your debts further. You might end up paying much more than what you borrowed.
Be aware of the kind of interest rates that the debt consolidation firm offers you. Make sure, that the interest rate offered is not a ‘teaser rate’, but a fixed one, which will not increase during the lifetime of the loan.
Be wary of expensive loan add-ons such as insurance against sickness, unemployment etc. Though, these extra advantages sounds great, they will cost you much more. It is a better idea to put off any extra money into an emergency fund, should an emergency arise down the road.
Try to avoid taking a secured debt consolidation loan. That will require collateral, which is usually, your home. Jeopardizing your home is not a viable idea. As, if you miss a payment or two, it might leave you homeless.
Doing a bit of research can greatly help. Look for the best loan rates and terms that suits your budget and circumstances.
Also remember, that a debt consolidation loan can hurt your credits. This will be reflected on your report with a low FICO score. Though, in the long run, once you repay all your debts, the credit ratings will go up again.
If you do not improve your money management skills, you might run into further debts.
The best alternative to debt consolidation is debt negotiation. Choose carefully, after considering your present situation.