The Hidden Costs of Debt Consolidation
Debt consolidation essentially allows people to stream all their debts through one source with a fairly low interest rate. Debt consolidation sounds like a dream come true when a person is in debt but there are some hidden costs of debt consolidation that many people are not aware of.
There are several hidden costs of debt consolidation. Three of these hidden costs are mentioned below:
Paying Way More In The Long Run Due To Credit Damage
If a person has had a bad credit history, then chances are that they will not be able to get a low interest rate. The interest rate will actually be higher in comparison. Even though a person will be paying less monthly, they will end up paying a larger amount on their debt in the long run.
Debt Consolidators Merging Fees into Loan
Many debt consolidators will tell a person that they do not need to worry anymore and that they will handle everything. However, what they don’t tell their clients is that they are going to be charging their fee in the loan repayment. This extra fee charge can be as high as 12% to 15% on top of the payment.
Charging Enrollment Fee, Monthly Administrative Fee and Transaction Fee
When a person signs up for a debt consolidation service to get their loans in order, they do not read the fine print. The debt consolidator assures a client that everything will be taken care of, however, in all this haze, the individual fails to review the fees and monthly charges that will apply to them.
These charges are usually small and are not visible unless the contract is read thoroughly. These charges may seem insignificant, however, when they are charged on a monthly basis, the amount sums up to a lot of money.
There are always hidden costs to debt consolidation. It is always advised to review the fine print in the contract to ensure that a person knows what they are getting into.
It is one thing to have bad credit in today’s wo ...
› read more
and get weekly money-savings tips!