How To Stay Away From Three Common Debt Consolidation Scams
When you’re requesting for a debt consolidation loan, you possibly have an overwhelming amount of debt and badly require a debt consolidation loan to consolidate all your debts into one affordable monthly payment. Unluckily, some scam debt consolidation companies always try to take advantage of the financial hardships faced by debt-ridden people. The following details would give you an overview of the three most common debt consolidation scams and what you should do to prevent them.
The most familiar form of debt consolidation loan scam is known as the money upfront tactic. In this type of a scam, you are assured a debt consolidation loan even though your credit rating is poor or you have an earlier bankruptcy. The drawback is that prior to receiving the loan, an upfront administrative or processing fee is charged, which on many occasions is exorbitant.
You make payment for the upfront fee and subsequently, either they would not keep in contact with you or they would inform you that there was some difficulty with your loan application. They retain your money but don’t offer you the loan.
Preventing this scam is easy: you should not pay an upfront charge while sending a loan application. When you’re obtaining a service, there is no problem in paying a fee. However, you should accept to pay the fee as a part of the loan program.
The second type of scam is named as bait and switch where you’re assured one thing and subsequently you end up obtaining something else. For instance, you are informed that you can avail the loan at 8%, however, when you arrive to sign the loan contract, the lender says that as a result of unexpected situations, the interest rate has become 15%. Because you’re considering the money, you sign the contract.
You can also prevent this scam easily. You must not accept any eleventh-hour adjustments and should not be sure of getting the money till you really receive it.
The third type of scam is hidden costs. Everybody understands that they need to pay interest for their loans. On certain occasions, the interest rate might be unbelievably less to make the consolidation loan seem more enticing. Nevertheless, there is a range of hidden fees that drastically raises the cost of the loan. These charges might be for disability insurance, life insurance, creditor insurance or even unemployment insurance. If you need insurance, discuss with an insurance agent. Just ensure all the fees and charges are clarified to you beforehand in order to make sure that you can precisely work out what you’re spending for.
Debt consolidation loans can lower your interest rate and merge all your debts into a single monthly payment. However, you should explore companies and look out for these scams so that you can gain from such a loan.
Written by: Justine
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Tagged as debt, debt management, family finances, financial debt management, money, money management, save money + Categorized as Economy articles