Debt consolidation just seems like a no-brainer. If you have, say, $10,000 in debts to three or four credit card companies and another $5,000 in the form of a personal loan then debt consolidation seems like a godsend. You could borrow $15,000 and presto! You get rid of those credit card companies and that loan company, which means an end to all those nasty phone calls you’ve been getting. Now, instead of having to make five payments a month, you’ll make just the one payment, which should be less than the total amount of the minimum payments you’ve been making.
Look before you leap
Looking before you leap off a cliff always makes good sense and so does looking before you leap into debt consolidation. This is because there are ways to consolidate your debts in ways not to and it’s important to know the differences.
Watch out for those online sharks
There are companies online who will offer to consolidate your debts but require that you pay high upfront fees. Unfortunately, there are companies that are even more unscrupulous. They’ll claim that they’ve paid off your debts with a debt consolidation loan and that all you have to do is pay them each month until you’ve repaid the loan. A few months later you discover that the debts were never paid off and that there is no way to get your money back because the company is either located offshore or has just vanished.
Be sure to do the math
A second alternative in debt consolidation is to get a debt consolidation loan from your bank, credit union or an online lender such as LendingTree. But before you sign up for one of these loans, do the math. If you owe $15,000 or more it’s likely to take you anywhere from 5 to 7 years to pay back the loan. If you would be paying just 6% for seven years, the total cost of your loan would be 18406.78. In other words, it might cost you much more than if you were to just pay off the credit cards yourself over a four to five year period. And do make certain you’re getting a much better interest rate than the interest rates on your credit cards.
Don’t jump into a debt management plan
Banks and credit unions are very big on suggesting you go to a consumer credit counseling agency for help. This is where you are assigned a debt counselor who will go over all of your assets and debts and help you develop an “affordable” debt management plan. Your counselor will then contact all of your lenders and attempt to negotiate a reduction in your interest rates and for them to accept your debt management plan. Again, on the surface, this might seem like a good way to consolidate your debts because once all of your creditors accept your plan, you’ll only have to send one check a month to the credit counseling agency, which will then pay your creditors for you. But you will still owe the $15,000 or whatever you started with, plus it will take you probably five years to complete your plan. Plus, you’ll have to give up your credit cards, make sure you don’t take on any new debt and make all of your payments on time. This is because if you miss a payment or two, your plan might be rescinded and you’d be right back in the stew.
The right way to consolidate your debts
Of course, were biased but we think that without doubt the best way to consolidate your debts is through a debt settlement plan. If you contract with us, we can get your debts reduced and probably substantially. In fact, debt settlement is the only way that you can get both your balances and interest rates reduced so you can get out of debt faster. We’ve helped thousands of families get out of debt in 24 to 48 months and to save thousands of dollars in the process. Contact us today for complete details so you’ll know more about the right way to consolidate your debts.
