What do I need to be worried about when consolidating debt?

Question

My friend wants to consolidate and is going to a seminar. It smells like a bit like a scam to me and my friends, so what are some tell-tale signs.

Answer 1

Scam or not consolidation almost always works out more expensive in the long run. Also a lot of companies that specialise in consolidation charge you extra as well. So if the initial debt totals 10,000 you borrow that and an arrangement fee. Tell your friend to look at the total cost before making a decision. There are better ways.

Answer 2

Interest rates. Fees.

I've seen people that consolidated their bills to get a lower payment and wound up with a higher interest rate then the bills they had before. They just stretch it out over a longer period of time so your payment is lower. In the long run, you pay more and are in debt longer.

Fees - some of the charge loan fees or other types of fees which just adds to your total debt.

The best way to get out of debt is to pick any card or debt you have and start dumping as much money into that one card as you can until it's paid in full. Then start on the next one and keep paying them off like that until they are all paid. Obviously you have to make the minimum payments on the others while you are paying the first one off.

Paying only the minimum payment on all the cards keeps you in debt forever. Minimum payments are set up to keep you in debt. Also, don't charge anything else on those cards. If you pay a card down and then charge a bunch more stuff on it, you haven't accomplished a thing.

Answer 3

Its best to consolidate debt through a reputable bank. Some seminars are just a way to generate business but its hard to tell if the people are reputable or not.