Debt Consolidation is a popular financial strategy used to control credit card debt. Typically, this involves a credit card balance transfer and a loan, either secured or unsecured. The loan is paid back with monthly payments.
When debt consolidation is not a good idea?
While Debt Consolidation is a Scam that can lower interest rates, it’s important to shop around before getting a personal loan. Some companies will only work with those with good credit, while others may be able to give you bad terms. If you’re unsure, contact your state attorney general’s office.
There are two main types of debt consolidation scams. These include those that promise to reduce your debt, and those that will take your money without offering you the services you need.
Scammers often email or call you frequently, claiming to have a way to help you get out of debt. They may ask you to send a certain amount of money into a special account. This can be a risky way to pay off your bills.
Other scams claim to offer a guaranteed reduction in your debt. It’s unlikely that any debt settlement company will guarantee a debt reduction. In fact, most of them are a scam.
Many debt consolidation companies also take up to a fee before paying your creditors. Often, the fee is hidden.
A good debt consolidation company will work with you to develop a plan to pay off your loans. Usually, this involves creating a single monthly payment, rather than multiple ones. However, the company can’t promise that your total interest costs will be lower.