Things You'll Need:
- time to compare debt consolidation loans
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Step 1
Watch out for debt consolidation loans with a high number of fees. The debt consolidation loan may be lower in interest than other offers, but the fees could make it more costly in the long run. Yes, I understand you want fast debt assistance, but don’t get yourself in a situation where you end up having to borrow more money. Add up all the fees on that debt consolidation loan. See if it’s really such a good deal compared with a loan that’s slightly higher in interest but without all those fees.
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Step 2
Avoid debt consolidation loans with super low payments. You may think you’re playing it safe by taking the loan with the lowest monthly payment, but it may end up costing you later on. All those low monthly payments mean more opportunities for the debt consolidation company to charge you interest. And that interest is going to keep you in debt longer than if you had just paid more (as much as you can) each month to get that loan paid off.
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Step 3
Be wary of those variable interest rate debt consolidation loans. The loan assistance company wants you to think that super low interest rate is going to stick around for a long time, but in reality anything goes with a variable rate loan. You may sign on the dotted line and before the ink dries—wham!—you’re suddenly stuck with a much higher interest rate. (Okay, maybe I exaggerate here, but you get the point.) If your current debt is at a fixed interest rate, then don’t gamble by trading it for a variable rate consolidation loan. It’s much better to borrow money knowing exactly what the loan is all about than having to worry that it could change for the worse on any given day.
Comments
dlcass said
on 12/16/2008 Excellent article. These loans can be tricky and you really have to do your homework and shop around. Thanks.