Get Out Of Debt Free? Not Likely.

The ads are slathered over the television, radio, and Internet: “We can slash your debt by more than 50% in five minutes.” The promises sound great, but can you trust them? That is a whole other issue.

The Truth About Bill Reduction

There are excellent debt relief plans that do cut your bills, but rarely by half. More likely, you are apt to save a couple hundred a month. These plans can, however, help people in need of debt relief. The bigger problem is that some people fall for the ads of unscrupulous businesses hook, line, and sinker. In some cases, these plans drive a person further into debt.

With some debt consolidation loans, the company totals up your bills, slaps on an interest rate of their choosing, and then charges you 30% interest. Sure, your loan payment is lowered, but the interest rate is absurd. You may have done better by approaching your credit card company and asking for a lower rate.

Pushing You Into Consolidation

Another ploy that is used commonly is one that involves pushing a person into using that business’s debt consolidation plan, even when it is not necessary. These businesses then take over your payments, and you have nothing to worry about. Look closely at these plans and you will find that not all of them state they will make the payment on time. If a debt consolidation company is late by even a day, late fees will be added on to the balance you owe. You are responsible for paying these fees, not them. This leads to questions about a debt consolidation firm going out of business, what happens then? You may be in more trouble than when you started.

Look Out for Hidden Fees

Loan consolidation firms claim there are no hidden fees. This is not always the case. Some charge an additional 10% to your balance as handling fees or processing fees. They also receive a rebate of sorts from the major credit card companies. The credit card companies are thrilled to get the money, and the companies are more than happy to rebate a bit of the payment to the debt consolidation firm for helping them out.

Switching Balances

Many people also decide to switch balances on one credit card to another. This is not a great idea. While the starting interest rate looks fantastic, you must ask yourself if you can have the balance paid off before the low rate expires. With some companies, there may be fine print claiming you must have the balance paid off by the year’s end or pay accrued interest charges. This means the company then adds the entire year’s interest onto your balance if you have not paid it off.

Before choosing any debt relief firm, do your homework. Look into paying off the debt yourself. Negotiate lower interest rates, extended loan terms, and no late fees. It can be done, but you have to ask first.