If you find that the majority of your debt is from credit cards, it is possible that you are considering a debt consolidation loan. These are offers that combine several unsecured debts into one payment, potentially with lower interest rates.
The truth is that debt consolidation loans promise one thing but deliver another. In fact, dishonest companies that promote debt relief programs like these continue to be a top consumer complaint received by the Federal Trade Commission. Here are some things you should consider:
- Debt consolidation doesn’t mean debt elimination – These kinds of loans only restructure your debt. In most cases, you are exchanging a lower monthly payment for a longer payment period. This means that you are paying more money over a longer period of time.
- The interest rate on the consolidation loan can change – This applies to credit card transfer offers that start as a low introductory rate, but after 90 days it jumps to a higher rate. Some of these offers provide no recourse either.