What tactic can have you end up more in debt than before?
There are more and more loan consolidators utilizing a tactic to secure a debt consolidation loan that can end up costing you more money in the end and put you further in debt than when you started. Hard to believe yes, but it happens to people everyday in search of fixing their debt situations. The trick is the interest and the length of the loan you are being offered. A loan payment may sound good to you if it takes $2,500.00 of monthly bills you write to your various creditors every month, and drops that amount overnight to $500.00. Here is the catch, your loan consolidator may be offering you a line of secured credit that is attached to your home, another mortgage. This $500.00 a month, while surely lower and looks nice, will unlike your credit card bills, be a payment you will owe for up to 20 years or more depending on your loan, and could include variable interest rates. In the end you can end up paying 5 times more than you originally owed in the long run when you do the math. The simple fact is you are looking to take a credit consolidation loan or debt loan, to get out of debt now. It is not something you want hanging over your head for the next decade or more. Don’t be fooled by the attractive lower monthly payment, sure it looks nice now, but how will it look every month over the next ten, or even twenty years or more? Take out your calculator when looking at a loan offered by a consolidator, and do the math. Find out the total amount of the loan, the real total, meaning the sum of all the payments and interest you will have to pay over the entire life of the loan. The number might and probably will surprise you.
What other option do I have?
There are other options and many other loans available that are unsecured and not attached to your personal property, especially your home. These loans, dependant on your credit and debt history will have a wide range of interest rates. Shop around and find the best deal to settle your financial woes. Whatever you do, never take a loan from a debt consolidator without adding up the numbers, interest, and most important how long this loan will be around, meaning the length in years of the life the loan. A slightly higher interest rate for 5 years can be much better than a lower rate for a lot of years. Do the math.