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How to find a good debt consolidation and counseling company
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Debt Consolidation - The Best Choice
The concept of debt consolidation is not clear to most of the people and they keep wondering whether to go for it. Well, whether a person should consolidate his loans is a relative matter, as it would depend on his personal and financial situation.
So before you decide whether to consolidate your loans, keep the following factors in mind:
Financial Savings
The most... Read debt consolidation article
How To Deal With Credit Card Debts
Do you have too much credit card debt?
You spend too much one month and you put it all on your credit card account. You can't pay it all off so you leave it until next month but you can't pay it off next month either. Before you know it your bill has grown into something that you can't manage and you are going to have to do something dramatic if you are ever going to get the debt unde... Read debt consolidation article
How to find a good debt consolidation and counseling company
If you are looking for a company that will help you consolidate your debt, you need to be cautious. Consolidating your loans into a single low interest loan can be a very good step financially, however there is a wide range of quality in the help you can receive. Some organizations are going to be more helpful than others and a few will even try to scam you.
Here are a few tips to make sure you go with a reputable debt consolidation company:
Don't assume that a non-profit company is necessarily going to look out for your interests more than a for profit debt consolidation company. There are non-profits that are basically trying to take advantage of people in debt.
Go with a company that has a good reputation. Your local bank is probably a good place to start. Banks are in the business of providing loans and they make money when people pay back those loans. A company that makes money just by getting someone to signup for a loan may be less likely to look out for your needs over the long term.
Watch out for balloon loans. Balloon loans are a type of debt that allows you to pay a very small amount monthly for 5 to 10 years. At the end of that period you are required to pay off the debt in full. Since the monthly payments are usually low, you often end up just paying on the interest. This means that at the end of 5 years you still have made very little progress toward getting out of debt.
Check with the Better Business Bureau before selecting a debt consolidation company. If others have had a bad experience you want to know before deciding to go with them.
Do the math yourself. Take the time to work through the expenses yourself and see how much you will be paying, how long it will take to pay off the loan, etc. Don't just rely on someone else to tell you what they think is best.
If you don't understand something be sure to ask questions until you do. A good debt company is going to want you to fully understand everything. If you get the feeling that they don't want to explain everything to you, beware.
Make sure you understand the difference between variable and fixed rate loans. If you sign up for a variable rate loan, you may get a lower rate initially, but within a few years it may go up. It is important for you to understand not only your starting payments, but what those payments may be in the future.
By following these guidelines and using good common sense you should be able to steer clear of companies that might be looking to take advantage of you.
More information about getting out of debt can be found at the Debt Consolidation Blog.
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Loan companies - Prime and sub prime lender market
Has anyone noticed how many loan companies now fill up the commercial breaks? Sofa, after of sofa of happy couples are shown, with carefully manipulated stereotypes discussing the consolidation of their finances, recommending a particular provider. Couples, who have had loan requests knocked back from the standard, high street or traditional credit lenders, find themselves turning to alternative finance providers in the hope that they can move their debt situations forward.
According to the Joseph Rowntree Foundation, there is increasing concern that UK consumers are assuming unmanageable amounts of debt, which may become a precarious situation should interest rates rise or if the relatively stable macroeconomic climate takes a turn for the worst. Despite these concerns, the Foundation asserts:
"Even a casual observer of the financial scene in the UK will have been struck by the increased marketing of products - including mortgages and remortgages, car loans and debt consolidation loans - specifically to people who have an impaired credit record or who are finding their existing debt difficult to mange. It might be predicted that such borrowers would be particularly vulnerable to unmanageable debt.
Lending to people with an impaired credit record is typically called sub-prime lending, a term more familiar with people in the US, than the UK. A number of lenders have entered this market who target their products to a customer market branded sub-prime, non-conforming or non status. In the US, this market is significantly more established and a lot of the US companies operating in this field are now marketing their products in the UK. The sheer size of the prime and sub-prime lender UK market led it to be labelled the most 'complete' in the world by the Miles review in 2004.
High street 'prime' lenders tend to operate under strict requirements and guidelines, seeking 'prime' customers based on criteria such as:
* Past evidence of a good repayment record
* Good personal characteristics (stable employment, income level, registered on electoral register)
The prime lending system excludes many who wish to borrow and may be able to repay the loans, but are not awarded the required credit score. The Joseph Rowntree Foundation reported that more than 25% of general credit applications and over 30% of mortgage applications are turned down because the standard criteria cannot be met, based on research by the Council of Mortgage Lenders in 2002.
The type of credit offered to sub-prime borrowers is called adverse credit. Adverse credit is available in a variety of forms including:
* Adverse loans (incorporating debt consolidation loans)
* Adverse mortgages or non-standard mortgages (encompassing first mortgages for sub-prime borrowers and remortgages for sub-prime borrowers)
* Adverse credit cards
All adverse credit products impose higher rates of interest on the borrower. Some of these financial products have been set up to genuinely help consumers that have fallen out of the mainstream assistance offered by high street banks. Yet there is growing concern, that if sub-prime borrowers do not do their homework on the options available to them, they become even more vulnerable.
Websites such as the personal finance research specialist Moneynet http://www.moneynet.co.uk provide extensive information on the different adverse credit products available, including adverse loans, adverse credit cards and non-standard mortgages. Many sub-prime borrowers who hold adverse credit cards complain of unduly high APRs, according to the Joseph Rowntree Foundation. These borrowers also complain that initial discounted rates are subsequently dropped following a single late repayment. It is a breach of the Consumer Credit Act to increase the rate of interest on default of repayments, but some sub-prime lenders get round this legislation by imposing a discounted rate which simply reverts to a 'normal' rate on default.
The report by the Joseph Rowntree Foundation provides an insight into the vastly inflated interest rates on some secured debt consolidation loans and unsecured debt consolidation loans, including some truly appalling horror stories from people who had failed to shop around for the best deal and neglected to read the small print.
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How to find a good debt consolidation and counseling company
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