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Dangers of Debt Consolidation

There are many companies offering debt consolidation services.  If you are not careful, you can be taken advantage of because many of them have very high fees or are just scams.  There goal is not to help you but to get your money.  

Avoid debt counseling companies that promise to lend your money to pay off your debt.  These companies offer high interest loans that you must secure with your home.  If you default on your loan, they will take your home.

Avoid finance company loans that use advertisements to entice you by claiming they have the solution to all your debt problems.  These companies normally have high interest rates and very high fees.  Additionally, working with a finance company will damage your credit report.

Avoid lenders who offer substantial loans with no questions asked, in exchange for you paying a big upfront fee.  No reputable lender will make such a promise.  These lenders will sell you a high interest loan and place a lien against your home or other important assets you own.

Avoid companies that promise to negotiate a debt consolidation
loan for you to pay off your creditors.  They will tell you initially to pay them each month to repay the loan.  However, they will never get you a loan or pay off your creditors.  They in a sense will just steal your money and ruin your credit.
 
See video below for more information regarding "Dangers of Debt Consolidation" from CNN Money.
 

 

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