Fees To Watch For When Consolidating Credit Card Debt
The promise of a streamlined debt consolidation program that offers low monthly payments is a glimmer of hope for those who simply cannot afford to make minimum monthly payments to their creditors. While consolidating debt is a solid and proven solution for many people in oppressive debt, it is important to proceed with caution when selecting a credit relief company with which to do business.
While myriad reputable consolidation agencies exist, there are also a large number of dishonest companies out there that would like nothing more than to bleed you dry. If you sign on the dotted line with one of these shady companies, you might find yourself in a worse financial situation than when you first began.
There are a few basic debt consolidation fees to watch out for when it comes time to sign a contract with any given company.
Educating yourself about these fees will give you the knowledge you need to steer clear of disreputable companies, negotiate consolidation plans at lower overall rates, and possibly even report fraudulent or dishonest companies to the proper authorities.
Red Flags and Shady Fees
1. Long-term, Low-interest Loans
While it may at first appear as though you’ve gotten lucky with a credit relief agency that is willing to charge you an extremely low interest rate, look closely at the overall terms before you enter into any new agreement.
If your debt consolidation company is only willing to give you a low interest rate for an extremely long-term repayment plan, ask yourself why that may be.
The fact of the matter is that the longer it takes to repay a loan, the more money you can expect to pay in overall interest charges. Though it may be tempting to pay a few dollars less each month on your consolidation payment, realize that a shorter-term loan at a slightly higher interest rate will probably save you money.
If a credit relief agency offers you a low-interest loan, make sure that this interest rate still applies if you decide to pay off your loan in a shorter period of time. If the company balks at this, continue looking for another consolidation company.
2. Fees for No Apparent Reason
Many lenders in the credit relief industry realize their prospective clients are in desperate situations. Disreputable companies will attempt to use this knowledge to their advantage by charging clients a wide variety of fees that are completely unfounded.
Some of these fees include:
* Registration fee
* Monthly maintenance fee
* Application fee
* Credit check fee
Be aware that all of these fees are ridiculous and that in most cases they can be negotiated away if you simply ask. Any debt relief program that charges more than one of these fees should be immediately dismissed from your list of prospective companies. If a company attaches only one of these fees to their loan terms, inform it that you are considering many other debt relief options that do not include upfront fees. This may motivate your consolidation company to waive the fee in order to secure your business.
3. Penalty Charges
Some shady consolidation companies attempt to hide hidden penalty charges in the fine print of their contracts. If you sign on the dotted line with one of these companies, you will likely be saddled with huge penalties for late payments. You may even be shocked to learn that a single late payment can cause your interest rate to spike for the duration of your repayment plan.
To avoid being stuck with exorbitant penalty charges, go over your prospective consolidation loan agreement with a fine-tooth comb. If there are any terms that you do not understand, ask your debt relief representative to explain. If any given explanation does not satisfy you, take the document to legal aid providers in your city for a free consultation.
They will let you know if you have anything to worry about and will counsel you as to whether you should look for a different company to handle your consolidation.
4. Ridiculous Demands
Some credit relief agencies will only offer you a low-interest consolidation loan if you agree to include every single one of your debts in the deal. While this may seem like a fair offer, be aware that this is not always the case.
Look closely at your various interest rates. If some of your student loans or other debts are currently being repaid at a very low interest rate, it is not in your best interest to include these amounts in your consolidation plan.
If any given company demands “all or nothing” be prepared to give them nothing, and find another credit relief agency that is willing to work with your wishes instead of making you conform to theirs.