Question: I’ve heard a lot about debt consolidation scams. Is debt consolidation a good idea and are these companies for real?
Answer: Whenever the economy is sliding downward, you can be certain that all sorts of debt consolidation scams will pop us and aim to take advantage of worried consumers.
People who are hurting financially read the grand promises made by so many lenders and feel it’s their way out of their current problems. Some lenders are ethical and actually deliver on what they promise, but too often the promises are empty.
"Probably the very best thing my earnings
have given me - is absense of worry.
I have not forgotten what it feels like to worry
whether you'll have enough to pay the bills.
Not to have to think about that any more
is the biggest luxury in the world.”
- J.K. Rowling |
This is particularly true on the Internet. The Internet is riddled with banner ads and pop-ups that entice consumers toward debt consolidation. Advertisements on television and the radio are as committed as ever to convince people that debt consolidation can solve all their problems.
However, in the end – it is only you, and you alone, who can solve your debt problem.
The promises of so many debt consolidation scams claim that by making a few calls to your creditors, they can combine your accounts into one low monthly payment, which makes it easier for you to pay off your balance.
The truth is that while they can call creditors and they can request payments to be lowered or removed, they aren’t likely to get results. What creditor will voluntarily agree to receive less money than they agreed to without getting something in return?
When people open a line of credit, they sign an agreement that states they will repay the money borrowed based on specific terms and conditions. The creditor will not waive his rights just because some company rep asks him to… nor should he.
Your creditors have every right to expect that you will repay them according to the initial terms that were agreed upon at signing. That is what you would expect if you were the creditor, right?
Debt consolidation scams are relatively easy to spot. If the offer sounds too good to be true – it is. Walk away.
If you have equity in your home, you may be able to consolidate your debt by refinancing your home or taking out a second mortgage. Only do this if you intend to payoff and close the other accounts, and never open another line of credit again.
The real problem is not your debt, it’s the behavior you exhibited to acquire so much debt. Debt consolidation will not necessarily change your behavior so don’t consolidate unless you are determined to change the behavior that got you here also.
Too often consolidation will just make it easier to go deeper into debt. People will see that their debts are now lower or better organized. They then think it will be okay to add a little something else… then another… then something else - and so it begins all over again.
Suddenly they realize that they are in the same predicament they were in before consolidating their debt…only now the situation is even worse.
Don’t waste time sorting through debt consolidation scams and potential quick-fixes. The only way to truly solve your debt problem is to take charge your financial house.
Educate yourself on how to handle debt. Use our many free tools and resources. Fill out a financial statement in order to get a firm grasp on the problem at hand. Learn methods of budgeting and repaying credit cards.
By arming yourself with financial knowledge and changing your spending and saving habits, you can quickly begin to change your financial future.
"The man who never has money enough to pay his debts
has too much of something else."
- James H. Aughey |
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Debt is NOT your friend. It's not a wonderful "tool" for building wealth. That's a myth.
