Consolidating Debt - Debt Consolidation Scams
Repay Debt Faster. Low Interest Rates - that is the hype.
The fact is that basically the debt consolidation company profits from this one. They buy - yes buy - a lower rate of interest from the company you owe money to by negotiating payment of thousands of dollars of debt. You are charged a fee for this facility and a monthly fee after that.
The debt consolidation provider pays off your loan faster, you don't. You keep paying them instead.
If you thought making regular paybacks by your due date was expensive, try making ONE LOW Payment every month.
These companies only buy bad debt to minimize the interest. They will buy groups of debt - thousands of dollars of debt from a company to get the lower interest rate - as well as they get a percentage kickback from your loan company to reward themselves for payment of that loan.
Debt consolidation scam fees are built into your monthly payment - So in the real world you pay as much as you could have if you had sent that extra payment to your loan company and paid off your higher interest rate credit card sooner by adding that extra fee to your payment monthly. Actually, you pay extra.
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 on the 15th of the month and your payment was due on the first, then your credit will carry a 30-day late payment monthly - every month-on all three of your credit records. Late payments stay on your credit history for 7 years (or longer). Feeling good now, I'll bet!
That's only a few. You could also be one of those individuals whose payments get omitted once in a while - Yes it happens all the time with Debt Consolidation practices.
Negotiation is something you can do yourself. If you just hate discussing to these people you can even empower someone you know and trust to negotiate a lower interest rate for you on your behalf. If you can't get anywhere negotiating with the very first person you talk to, ask to talk to a manager. If you can't get anywhere by the third supervisor, you're trapped.
- Negotiate your own lower Interest rate
- Stretch out your repayment schedule
- Pay off the largest interest debts First and add more money
- Write 2 checks: One for the lowest payment and One for any additional money with a note in the memo that says: "Principal Only Payment." This one simple action can save you tons of money. If you don't state this, your money is automatically taken to the interest and you'll pay more interest for a longer period. Yeah, that really sucks, but not for them. For you.
- Figure out - there are freely available debt calculators all over the web - what it would take to repay your highest interest cards first. I plugged in my own and came up with the fact that if I add $60 a month to my minimum credit card bill, I can have a $1300 debt cleared in 12 months with $66 interest.
- If I carry on with the minimum payment, It can take longer than 6 years and cost me over $2500. Just that one action that I took put over $1134 back in my purse - in one year. And I did it on my own. Without debt consolidation fees!
I don't recommend any debt consolidation company. They prey on your despair and the doom and gloom of the length of paying out your credit cards at minimum payments.
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