Cons to consolidating debt
Another drawback is that while you’re paying the settlement company, most won’t tell you exactly how much of your monthly payment is going towards your debts and how much is actually being deducted as their “fee.” It goes without saying that you do NOT want to get scammed by a debt settlement company.
Some ways to do your own due diligence when it comes to dealing with debt settlement companies include: – Ask lots of questions, like how long the company has been in business, what type of training its employees have.
You get a lump sum of money, often with closing costs taken out, which you can then use to pay off your debt or for any other purpose.
You’ll have a fixed monthly payment and a repayment schedule.
Many times this amount is less than 50% of the original debt, which can end up saving you quite a lot of money in the long run.
Now for the cons, there are quite a few so stay with me.
Debt settlement should only be used by those that already have very poor credit.
Instead of getting a lump sum, you draw down money you need — to pay off credit card balances, for example — using checks or a debit card linked to the credit line.Sometimes these companies misleadingly advertise their services as a way to consolidate debt — or “debt consolidation,” — but make no bones about it, this is not a When you hire a debt settlement company you are hiring them to negotiate with your lenders on your behalf.Their job is to negotiate a new, much lower amount for you to pay on the account.MORE: Calculate personal loan rates If you’ve ruled out other options, weighed the pros and cons of consolidating with home equity and determined it’s the viable path, then it’s a choice of a home equity loan or a HELOC.Home equity loans are a type of second mortgage based on the value of your home beyond what you owe on your primary mortgage.
Personal loan: For most borrowers, interest rates on debt consolidation loans are lower than rates on regular credit cards.