Five Critical Facts About Debt Consolidation

 

Many families feel overwhelmed by their consumer debt. Companies that promise to help lower monthly payments and quickly pay off debt may sound like an appealing way out. Unfortunately, debt consolidation offers are often too good to be true. Here are some critical facts you should know about debt consolidation:

1. If you have a poor credit rating, your consolidated debt may end up with a higher interest rate than you are already paying.  The consolidated debt may offer a lower monthly payment, but in the end you may pay more.
2. Beware of built-in fees.  Make sure you know exactly how much of your new monthly payment will be going towards the consolidator’s fees and how much will be going towards payment of your debt.
3. Debt consolidators have been known to miss or make late payments.  When your monthly payments are not in your hands, you run the risk of the third party missing the payment or paying it late, which will negatively affect your credit and could result in additional fees.
4. Aside from debt consolidation, there are other sources of debt relief to consider, such as a home equity loan, personal loan, balance transfers to lower- or zero-interest cards or even bankruptcy.  These alternatives carry their own potential risks and should be discussed with your law firm.
5. Before you pay or sign anything, call your law firm and speak with an attorney. An attorney may review your consolidation agreement or offer alternative solutions.

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