naturalization characteristic: 3 Things That Make Debt Consolidation Dangerous!

Saturday, November 3, 2012

3 Things That Make Debt Consolidation Dangerous!

If you do it right, debt consolidation can be a very helpful tool in your quest to get out of debt. It can help provide you with one affordable monthly payment that is much easier to manage than the several payments you are currently trying to handle. When done right, debt consolidation can be a great resource to you when you are trying to get out of debt.

But what about the potential risks of debt consolidation? No doubt you?ve heard many people warning you to stay away from debt consolidation. They say that it is not safe, or not smart, to participate in debt consolidation. What exactly are they talking about?

It is true, there are potential risks when it comes to participating in debt consolidation. Here are 3 things that can make debt consolidation dangerous:

1. Not working with a reputable company.

If you participate in debt consolidation, and you are not working with a reputable company, it?s true, you should beware. That is one of the main reasons why the debt consolidation has sometimes gotten a bad rap. There are many companies out there who do not deliver everything that they promise. There are also many flat out scams.

It is important to know who you are working with before you sign up. Ask many questions before you sign the papers or give them any of your personal information. Check them out with the Better Business Bureau. Look online and see what is being said about them. It is important to make sure you are working with a reputable debt consolidation company.

2. You might not end up with a smaller payment.

The main idea behind debt consolidation is to provide you with a smaller, more manageable monthly payment. In theory, this is great. But in reality, sometimes this doesn?t always happen. Before you begin speaking with any debt consolidation company, make sure you know exactly what your current finances are looking like. How much are you paying monthly to your current debtors? What are your current interest rates?

Make sure that if you sign up for debt consolidation, that you are ending up with a lower monthly payment and/or interest rate than what you are currently paying. If not, their service may not be worth the money to you. And if you end up with a higher monthly payment than you currently have, it may become even harder for you to make your monthly payment.

3. It can prevent you from getting new credit in the future.

Participating in debt consolidation should not directly negatively impact your credit score. But it still may make it hard for you to get new credit in the future. If you participate in debt consolidation, it will show up on your credit report. It shouldn?t bring your score down, but future potential creditors will be able to see that you took part in debt consolidation. Seeing this may make them view you as a higher potential risk, and you may have a hard time getting them to approve you for new lines of credit.

That said, if you are in a situation where you are considering debt consolidation you may already have bad credit that will hurt your chances from getting new credit in the future. Just know that having debt consolidation show up on there can hurt you even more. If you are in over your head with bills this aspect may not be as important to you. Just make sure you weigh the future effects when you are considering whether or not to participate in a debt consolidation program.

Conclusion:

There are some great advantages to debt consolidation, as well as a few drawbacks. It can be very safe and beneficial when done right. If you are considering using a debt consolidation company to help you get out of debt, just make sure that you are working with a reputable company, and that you know the terms and effects before you sign up.

Nicole is a writer for Star Reviews, where they search & compare, and you save. View their debt consolidation reviews.