Debt Consolidation Tips
Debt consolidation companies are often compared to politicians – overpromising and never delivering. While most debt consolidation companies guarantee lower loan payments, single payment options and decreased interest rates, often these payments have higher interest rates, which compounds into more debt.
Many debtors enter into consolidation agreements simply hoping to improve their credit scores in an attempt to purchase a home in the future. If someone has a great deal of financial debt, especially related to credit cards, consolidation loans are helpful, but only if the debtor is proactive, paying close attention to debt consolidation traps.
- Consolidation Fix – Most people enter into consolidation agreements in a desire to decrease overall debt. Striving to become debt-free, many people enter into these agreements rashly. If people don’t want to change their spending habits, these types of consolidation loans will prove ineffective. People need to change their lifestyles and behaviors in order to institute new money spending habits that are proactive towards reducing debt and saving money.
- Expensive Services – Instead of pursuing expensive debt consolidation services, people can be proactive and decrease debt on their own. Homeowners can consider taking out a home equity line of credit or pursuing zero-interest credit cards to help reduce overall debt.
- Compounding Interest – Many times consolidation companies hide fees in the interest rates, which means that people are paying more than they should. For example, if someone were to obtain a 7-year car loan instead of a standard 3-year car loan, ultimately people would pay more interest in the additional 4-year period. While payments may appear less in the short-term, they add up in the long run.
- Home Equity Lines of Credit – This type of loan is essentially a line of credit against a home. This type of loan is a priority payment option, as with mortgages, and homeowners don’t want a bank foreclosing on their home. If someone is considering taking out a home equity line of credit, a home should have a minimum 20-percent equity based on home value. This is also important as it helps the homeowner maintain equity in their property in case such an occasion should arise that requires selling the home.
There are a number of different loan types on today’s market. Not every type of loan fits everyone’s need, which is why it’s important to speak to a professional but also understand the pros and cons associated with debt consolidation and loan services.
My Hard Money Lenders works with a variety of lenders by state, all of which specialize in hard money loans and fast loan funding. They specifically work with apartment building loans, commercial construction loans, residential home bridge loans, commercial property loans, commercial building loans and real estate development loans.