Debt Consolidation - Scams In Debt Consolidation
Settle Debt Faster. Low Interest Rates - that is the publicity.
The fact is that basically the debt consolidation company gets benefited from this one. They buy - yes buy - a lower interest rate from the company you owe money to by negotiating settlement of thousands of dollars of debt. You are charged a rate for this service and a monthly fee thereafter.
The debt consolidation supplier pays off your loan faster, you don't. You keep paying them in its place.
If you thought making regular paybacks by your due date was expensive, try making ONE LOW Payment per month.
These companies only buy bad debt to lower the interest. They will buy sets of debt - thousands of dollars of debt from an organization to get the lower interest rate - plus they get a percentage kickback from your credit company to reward themselves for payment of that balance due.
Debt consolidation scam fees are built into your monthly payment - So literally you pay as much as you could have if you had sent that extra payment to your financing company and paid off your higher interest rate credit card faster by adding that additional fee to your payment each month. Actually, you pay more.
They don't re-negotiate your payment date. That means that they pay everyone's debt at the same time, once a month.
If they pay on the 15th of the month and your payment was payable on the first, then your credit will carry a 30-day late payment once per month - every month-on all three of your credit reports. Late payments remain on your credit history for 7 years (or more time). Feeling good now, I'll bet!
That's not all. You could also be one of those people whose payments get skipped once in a while - Yes it happens all the time with Debt Consolidation procedures.
Negotiation is something you can do yourself. If you just hate speaking to these people you can even authorize someone you know and trust to reconcile a lower interest rate for you on your advantage. If you can't get anywhere negotiating with the first person you talk to, ask to talk to a supervisor. If you can't get anywhere by the third supervisor, you're caught.
- Negotiate your own lower Interest rate
- Stretch your repayment schedule
- Pay off the largest interest debts First and add further money
- Write 2 checks: One for the minimum payment and One for any additional money with a mention in the memo that reads: "Principal Only Payment." This one simple step can save you tons of money. If you don't do this, your money is automatically used to the interest and you'll pay more interest for a longer period. Yeah, that really sucks, certainly not for them. For you.
- Figure out - there are freely available debt calculators all over the net - what it would take to pay off your highest interest cards first. I connected my own and got up to the fact that if I add $60 a month to my minimum credit card payment, I can have a $1300 debt paid off in 12 months with $66 interest.
- If I proceed with the minimum payment, It can take longer than 6 years and cost me over $2500. Actually that one action that I took put over $1134 back in my account - in one year. And I did it myself. Without debt consolidation charges!
I don't recommend any debt consolidation firm. They prey on your desperation and the doom and gloom of the length of repaying your credit cards at minimum payments.
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