The interest rates on Direct Debt Consolidation Loans have increased over the period of years since 2006, which is pulling more private debt consolidation loan providers into main business. Apart from private loan providers, the Federal Trade Commission has also exposed various non-profit organizations which were funding for-profit loan providing companies.
It is still difficult to trust all loan providers but you have to start from somewhere to pay off your previous debt and save money on loan interest. Here are common debt consolidation traps and some tips to avoid these traps.
According to estimates, debt consolidation loans are successful in getting rid of the old debt up to 70%. The loan provider will definitely portray debt consolidation loan as a cure-all package which will eradicate all your financial problems. But that’s not the case. It is basically a loan-over-loan which requires optimum financial management to cover up the costs and interests.
A trustworthy loan provider company will offer you credit and financial counseling for preparing you to manage your hard-earned money.
There are many companies which offer attractive loan packages with titles like 'unbelievably low costs'. The company may be offering you surprisingly low interest but earning more than high interest amount from you by charging you hidden fees and costs like upfront fee and monthly fee.
The solution to this risk is debt consolidation calculator. Ask your loan providing company to provide you a detailed document of all the expenses, costs, and fees included in the loan package. Use debt consolidation calculator to calculate all costs and ask the loan provider to write the total amount and major fee in the contract. Make sure that your creditor has signed the contract.
Many companies ask you to sign the agreement with statement 'special conditions apply' or something similar to this. Remember that these special conditions may also include a rise in interest rates after every quarter of the year or any similar condition.
Ask the loan provider to demonstrate the details of special conditions. Don't sign the contract if those conditions are not affordable to you. Otherwise, prepare a separate contract of agreement with all special conditions clearly stated on it.
Many debt consolidation companies make strong promises with convincing statement without even looking into your profile, credit history, or special needs. This is a clear sign of scam companies. Working with creditable companies will give peace of mind while saving you money and helping your credit score!