Do you sometimes feel as if you’re drowning under a sea of bills and late payment notices? Are collection agencies becoming your most frequented contacts? If so, then you may want to consider debt consolidation. With a myriad of consolidation programs and techniques, it’s never been easier to forge your way out of a mountain of debt. Unfortunately, with the rise in consolidation services comes a rise in less-than-perfect practices. Protect your financial future by avoiding these common debt consolidation traps.
Cycle of Increasing Debt
The last thing a consumer typically thinks of when they consolidate their debt is increasing this balance. While consolidating debt frees up more money each month, many consumers view this as an opportunity not to grow their savings account (or pay more on their outstanding balances), but to eventually open another line of credit since their current credit score is improved. Did you know nearly 70-percent of individuals who use a debt consolidation service end up owing more than their original debt several years down the road? One credit commentator refers to this type of financial behavior as yo-yo dieting with your credit report, and he’s correct. If you are interested in credit score visit your650score.com.
Believe They’re The Only Way
While debt consolidation services offer professional-level advice regarding this process, there are few steps these companies can make that you can’t do on your own. Think about it: why spend hundreds or thousands of dollars to consolidate your debt when this process can be accomplished by making several phone calls to your creditors or collection agencies. Of course, there are times when using a consolidation service is your ideal choice, often times these services are merely simplifying a task you can successfully accomplish yourself.
If you’re interested in reducing your monthly bill payments and consolidating your overall balances, speak directly with your creditors. You may be surprised they offer in-house consolidation services free of charge. Remember, the primary goal of any creditor or collection agency is to receive their owed monies. Avoid complicating this task when possible.
Debt Consolidation Loans – Higher Interest Rates?
The idea of a debt consolidation loan is to combine multiple outstanding balances into a single monthly payment. While this may be the ideal option for many consumers, it’s important to realize that these lowered monthly payments are often supported by higher interest rates. For example, you may be reducing your monthly payments, but it may be extending the amount of time you pay on the particular debt. Think of it as spending 7-years paying off a debt that should of taken your 4-years.