Debt consolidation is simply the act of taking out one loan to pay off several loans from varying lenders. The advantage to taking out a debt consolidation loan is that you will only have one monthly payment and usually it is at a much lower interest rate than all of the individual credit card balances you are trying to pay down each month. Not every online debt consolidation company is a good match for you, so be sure to look for these three important factors when you are shopping for a company to work with.
Watch out for companies that encourage you to borrow more than you need.
Debt consolidation loans are usually secured against the largest asset you own, your home. The point of the loan is to pay off your high interest credit cards and get yourself in good financial shape. Be wary of lenders that encourage you to take out extra money for a vacation or to buy things you might want. If something were to happen, rendering you unable to payback the loan, you could lose your house. The goal is to pay off the consolidation loan as quickly as possible, so only borrow what you need.
Watch out for lenders that encourage you to take a long time to pay off your consolidation loan.
The goal of a consolidation loan is to pay off your debt quickly and if you take 15 or 30 years to pay off your consolidation loan, you will be in debt for a long time. Dont be swayed by a lender that offers you really low payments if you spread them over a longer period of time. Chances are you will pay much more in interest over the long run and the longer your debt is outstanding, the longer you are at risk of losing your house if you miss payments.
Watch out for higher interest rates than advertised.
You see the online ads for very low interest rates when you consolidate your debts with certain companies, but you might not qualify for those low interest rates. The very debts you are trying to pay off might keep you from getting the advertised rates. Watch out for companies that bate you with low rates and then offer you much higher rates when it comes time to sign on the dotted line.
Carrie Reeder is the owner of http://www.ABCLoanGuide.com, an informational website about various types of loans.
View Our Recommended Debt Consolidation Companies Online.
Also, view our recommended Home Equity Line of Credit Lenders online.