Debt Consolidation Loans Wednesday, September 8th, 2010
Debt Consolidation Loan Warning!
Beware of any company that is offering debt consolidation loans at a low interest rates even if you have a poor credit history,
These are almost always fraudulent, illegitimate companies. You would be required to
send in a high one time processing/application fee. That initial fee is how they make their
money and you will more than likely never see their promised loan. Often, when you contact them to find out
where your loan is, you'll find that they have disappeared or never really existed in the
first place. These individuals or groups that make the promises are often virtually impossible to
track down even with legal assistance.
Payday loans
Payday loans are another trap that many people who are struggling
often fall into. The payday loan company requires that you show them recent pay stubs, and they
advance you cash based on the wage amount. These payday loans are marketed as short term loans that
are to be paid back on the next payday, or spread out over several paydays.
The fees charged are exorbitant. If you
borrow say $400 and pay back $50 a week, you may end up paying a total
of more than $650.00! If you are unable to make the payment you will
be forced to renew your loan at a penalty of $40-$50 for each occurrence.
Considering that debt was a problem when you took out the loan, the payday loan can be very dangerous indeed.
Home Equity Loan
Home equity loans are very popular.
In many cases the person with credit problems may be tempted to
take out a home loan to consolidate all of their unsecured debts.
The problem is that this converts unsecured debts to a
secured debt. Now, if you get behind on your payments to a credit card company,
they don't take back the items you charged on the credit card.
BUT, if you fail to make your payments on a home equity loan, your house is at stake.
The institution that provided the loan can and will take your home if you don't make your payments.
Finance companies
While loans through finance companies are simialr to loans through a bank,
finance companies are not banks. They are in the business of lending money. and have much lower standards than banks.
You may be able to get a debt consolidation
loan from a finance company, but, because they
make loans to so many poor credit risks, you'll pay unbelievably
high interest rates often as much as 40%. Most banks are willing
to work with you to agree to terms if you can't make your
payments, but a finance company loan usually adds
harsh penalties if you miss even a single payment. You may also be required
to put down your car or some other valuable possession as collateral to
secure the loan. This can result in the loss of that posession in the event
that you default. Collection department harrassment and wage garnishment are
the norm with finance companies.
