Debt Consolidation - Scams In Debt Consolidation
Repay Loans Faster. Low Interest Rates - that is the publicity.
The fact is that only the debt consolidation company benefits from this one. They buy - yes buy - a lower rate of interest from the company you owe money to by negotiating pay back of thousands of dollars of debt. You are charged a rate for this service and a monthly fee then.
The debt consolidation provider pays off your loan quicker, you don't. You keep paying them in its place.
If you thought making regular payments by your due date was expensive, try making ONE LOW Payment monthly.
These companies only buy bad debt to minimize the interest. They will buy collections of debt - thousands of dollars of debt from an organization to get the lower interest rate - plus they get a percentage kickback from your financing company to reward themselves for payment of that loan.
Debt consolidation scam fees are included in your monthly payment - So literally you pay as much as you would have if you had sent that extra payment to your credit company and paid off your higher interest rate credit card sooner by adding that increased fee to your payment each month. Actually, you pay more.
They don't re-negotiate your due date. That means that they pay everyone's installment at the same time, once a month.
If they pay out on the 15th of the month and your payment was payable on the first, then your credit will take a 30-day late payment once a month - every month-on all three of your credit records. Late payments stick on your credit history for 7 years (or more time). Feeling good now, I'll bet!
That's not all. You could also be one of those persons whose payments get omitted once in a while - Yes it occurs all the time with Debt Consolidation procedures.
Negotiation is something you can do on your own. If you just hate talking to these people you can even empower someone you know and trust to make a deal for a lower interest rate for you on your advantage. If you can't get anywhere negotiating with the first person you talk to, ask to talk to a higher authority. If you can't get anywhere by the third supervisor, you're trapped.
- Negotiate your own reduced Interest rate
- Stretch your repayment schedule
- Pay off the highest interest debts First and add extra money
- Write 2 checks: One for the lowest payment and One for any additional money with a word in the memo that reads: "Principal Only Payment." This one simple step can save you tons of money. If you don't mention this, your money is automatically taken to the interest and you'll pay more interest for an extended period. Yeah, that really sucks, certainly not for them. For you.
- Figure out - there are free debt calculators all over the internet - what it would take to repay your highest interest cards first. I connected my own and got up to the fact that if I add $60 a month to my minimum credit card payment, I can have a $1300 debt paid in 12 months with $66 interest.
- If I carry on with the minimum payment, It can take more than 6 years and cost me over $2500. Actually that one action on my part put over $1134 back in my pocket - in one year. And I did it on my own. Without debt consolidation costs!
I don't recommend any debt consolidation firm. They prey on your desperation and the doom and gloom of the length of paying back your credit cards at minimum payments.
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