Know your loan
The most crucial piece of advice that you must take into account before signing on the dotted line is knowing precisely what type of loan you are taking on. Not all loans are created equal and you must know what loan option you need and will work for you and your unique financial situation. A line of equity on your home can be a great option, but read the fine print. Know how much the principle or total loan amount is, how much the interest will be, and the total amount you will pay over the lifetime of the loan itself. If you are unsure of the answer to any of these questions, stop, don’t sign and investigate.
Shop around
Take the time to look at several loan options before choosing one to consolidate your debts. There are tens of thousands of companies and nonprofit credit consolidators out there looking for your business. Look around online before you sign up with any of them. Shop for the best interest rates, look for options with no upfront fees or costs, and don’t be afraid to stop the process and ask questions if you feel like you are not getting the answers to the questions you may have.
Buyers Beware: Scams
Sadly for many Americans who find themselves with credit problems and are drowning in debt, there are companies out there ready to help you go further into debt. These companies make promises that will clean up your credit in weeks, erase all your debts instantly, and so on. The old saying of “if it is too good to be true, it probably isn’t” is a good piece of advice. The simple truth is Debt Consolidation consists of renegotiating your outstanding debt, taking a new loan with a lower interest rate and lower monthly payment, and paying off your debts without killing your wallet. The claims of these scams are erroneous and easily spotted when you know what to look for. Check with your local BBB (Better Business Bureau) to make sure the credit consolidator you choose to work with and represent you is in good standing and has an excellent reputation. A little bit of research can save you thousands of dollars and a lot of headaches.
Read your loan contract
Read your loan contract word for word and look for hidden fees, third party payments, and other liabilities that tend to hide in the small print. It may take some time, but the reality is that too many people are signing contracts for loans, often attached to their home’s equity, without knowing what they are agreeing to completely. Take your time and read the fine print of your loan.