Beware of Catchy Debt Consolidators!
By: hazel | Posted: 29th November 2006
Dealing with credit card debt is not as hard as you may think. If there's any consolation, you're not the only one facing such situation. At some point, many people like you face financial crises with credit card debt.
More and more consumers today find themselves in the uncomfortable situation of only being able to afford the minimum payments on their credit cards. Or, even worse, not being able to afford even the minimum payments. In today?s world, it is often easy to get in over your head and find yourself spending more than you make. It seems that everything is going up but wages, and it is all too easy to fall behind.
Credit card debts can mount up and get out of control quickly, you can reduce them today!
Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?
You?re not alone. Many people face a financial crisis some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming.
If your objective is to reduce interest rates and lower your monthly payments, avoid bankruptcy, consolidate your bills and have one monthly payment, or simply get out of debt the fastest way possible, then a debt consolidation loan could provide the answer.
Beware of Catchy Debt Consolidators
Debt consolidators usually attract positive attention at the start because they give the impression that they will neatly arrange all your debts into an organized and even lighter one. Their campaigns make debt relief seem to be so straightforward. They will just consolidate all your bills and convert the interest rates to as low as 0%. Unfortunately, people who have fallen prey to them have experiences worse than the opposite of these empty promises.
Normal tendency when experiencing financial crisis is to get loans to cover up for previous credits. This being a well-known phenomenon, debt consolidators do their best to entice people into these types of situations with debt consolidation loans which promise easy and immediate processing and approval as well as lower monthly payments and interest rates. Being close to desperation, people tend to become easily lured by such and grab them without a second thought.
If these people only compute how much they actually pay in totality, they will surely be surprised that it is a lot higher. Sure, the monthly payments are lower but this is mainly because they are spread over a longer period of time. What are usually unnoticed are the interest rates which are, in fact, higher. In most instances, rates go as high as 21% or 22% and these subtly and discreetly wring people in their necks while burying them deeper into a financial rut.
Debt consolidators also assure customers that they will be in charge of everything. They will apparently coordinate with your creditors. All that is left to do is make one easy payment every month. However, what happens in reality is that they actually charge for such service by taking hold of about 10% of payment given monthly. This is about $50 for every $500 monthly payment. Instead of such amount being used to significantly reduce debt, it automatically goes to the deceiving hands of debt consolidators.
Most of their services are obviously those which you can do on your own given the right information. You yourself can negotiate with your creditors to make payments more manageable in the light of a current financial difficulty. You need not shell out such a big amount for that. Most creditors are willing to bend a little if only they will be aware of the circumstances.
How to address Debt Collectors. There is a law that gives certain conditions for debt collectors as to when and how they should ask you to pay. The federal law, Fair Debt Collection Practices Act, clearly states that those collecting debts may not bug you, give false assertions, or do practices that are not fair when they are getting to collect money from you.
Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?
The Consumer Credit Counselling Service (CCCS) reports that calls from people worried about debt have been increased by 50% compared with last year.
You can stop a debt collector from contacting you by writing a letter to the collector telling them to stop. Once the collector receives your letter, they may not contact you again except to say there will be no further contact or to notify you that the debt collector or the creditor intends to take some specific action. Please note, however, that sending such a letter to a collector does not make the debt go away if you actually owe it. You could still be sued by the debt collector or your original creditor.
Considering filing bankruptcy? If your finances are in ruins and you're considering filing bankruptcy, there's a few things you should know.
What makes doing the negotiations and payments on your own a lot better is that certain cases have already been reported where the debt consolidators themselves are making late payments. They regularly ask the payment from their customers but they remit them late thus causing the customers more charges which they are not made aware of. Such will only be added up to the monthly payments unnoticed.
Balance transfer cards are also prevalent nowadays which are usual debt consolidation tools. Just the same, they promise lower interest rates. However, you have to take note that such low rates aren't going to be the case forever. After a few months, they will increase. Of course, when that happens, you will look for another provider. The network of credit companies sees this kind of activity and considers you as a risk thinking that something else is behind your switching. Thus, your switching may not be approved and you are left without a choice but hold on to the card and suffer with its high rates.
It is obviously wiser to think of other options instead of resorting to the services of debt consolidators. Home equity loans, for example, are better options because of their single-digit interest rates which are even tax-deductible. In such cases also, since you do have a home equity, your property may be up for a higher amount refinancing. In turn, you can use the excess money to settle your debts. You may also try personal loans especially if you used to have a good credit history. The interest rate may still be high, around 11%, but this remains to be a better alternative as compared to the 20%++ rate of debt consolidators.
There are several other options that you can try out. If you want to know more about them, you can seek advice and gather information from certain organizations providing credit counselling. Once you have the information that you need, you deal with the situation yourself. Most debt consolidators have already been proven to be unhelpful thus should not take part in your alternatives anymore. You need not worry about being exposed to harassment as there are laws such as the Fair Debt Collection Practices Act to protect you.
Debt Consolidation- Debt Consolidation is an easy and timely alternative. A Debt Consolidation Counselor will evaluate your current situation and past debt and develop a budget for you.
In a credit card debt consolidation, your average interest rate may be reduced. All your loans can also be transferred to one single card that has a lower interest rate than the ones you are currently paying.
The average American household carries almost $10,000 in credit card debt. When this is added to the mortgage and auto loan found in the typical home, the debt can become overwhelming.
Whatever your motivations, a decision to consolidate debt online may be the solution but before you make your decision or offer detailed personal information to debt consolidation companies check to see what they have to offer.
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