Debt Consolidation Traps to Avoid
We all know what it’s like to fall into the debt trap. You start out great figuring that you’re never going to run into problems with money. You never spend more than you have in the bank and credit cards are no big deal. And then it all falls apart. We have definitely all been there and the process of getting out of debt is, of course, a whole lot more difficult than getting into it (and a lot less fun too).
The problem with getting out of debt is making sure that you aren’t falling into any of the debt consolidation traps that are lurking around waiting for an unsuspecting target. You definitely do not want to accidentally get into debt and then end up in even more trouble trying to get out it. But of course, if you’ve never been the victim of a debt consolidation trap then you probably don’t know what to watch out for. Here are the biggest debt consolidation traps to watch out for when you’re looking for help with your debt.
Not Paying Your Card’s Minimum Payment
Consolidating your credit card debt onto one credit card with a lower interest rate is a great way to get back control of your credit card debt and work hard towards paying it off in a reasonable amount of time. There are many things to consider when choosing a balance transfer, but one of the most important ones to remember is that a balance transfer takes time (sometimes up to 2 weeks) to process. This means the period of time it takes for your balance transfer to process you still need to pay at least your minimum payment on any and all of your cards. People often assume that their balance transfer will take effect immediately and when it doesn’t they’re charged late fees because they didn’t bother making a payment to their credit cards. Even after you’re sure that your balance transfer has taken effect you should double check all your balances to verify that you don’t need to make any other payments.
Taking On Several Loans
If you apply for several loans at the same time it’s going to hurt your credit. Every application for a loan or credit account triggers an inquiry into your credit history and each of those inquiries lowers your credit scores a little bit. Those hits are going to make a big difference on your report, so even though you may be trying to shop around and get a better rate don’t apply for every single one you find.
Continue to shop around; just don’t fill out an application for all the loans you find. Your main goal here is to consolidate your debt, not negatively affect your credit history more than is necessary. Do some research on all the debt consolidation loans that you want to apply for, ask all of your potential lenders about their minimum credit score requirements and then only apply for the loan that you have the best chance of being approved for.
Online Debt Consolidation
Not all online debt consolidation programs are scams but you definitely want to make sure you’re watching out for the ones that are. If you aren’t careful you could end up with a company that isn’t even in the debt consolidation business. You need to make sure that you are looking for a reputable company right from the start. That means you’ll have to do your homework. Don’t just take money from the first lender that offers it to you or the first lender you find.
Another important thing to watch for is fees. You should never have to pay money to get money so make sure that you’re watching for this. If any online company says you need to pay them money to review your application or to start the process it’s definitely a scam. Make sure that you never pay any money to someone that’s offering you a debt consolidation loan.
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Debt consolidation is a great way to work on your debt and get yourself back on track when it comes to your personal finances. Consolidating your debt will simplify your payment plan and hopefully reduce your interest rate. If done properly and with the help of a legitimate debt consolidation specialist, it can and will help you pay down your debt and improve and credit history so that in the future your credit will help you and not hinder you.