Debt Consolidation Cons - Some Debt Consolidation Tips to Help When Considering the Plunge

Are you thinking of going through a debt consolidation? If so, here are some debt consolidation tips that you might want to take into consideration before you take the plunge.

One of the first things that you want to consider is the effect that it will have on your credit. If you get the consolidation from equity in your home then you probably don’t have to much to worry about as it will only show an increase in the amount of your mortgage. This is not a big deal as long as the home is worth more than the value of that increase.

Your credit cards could be an entirely different story though. Sometimes by calling your card holders you can get them to settle for a lower amount owed but when you do that they are then able to add remarks to your credit report that other creditors might deem as a black spot, Such as “account closed be lender” or in some cased “account paid as agreed”. The account paid as agreed tells other lenders that the full amount of the previous line of credit was not paid in full and gives them cause to question your creditworthiness.

The other little quote that they may add, “account closed by lender”,tells other potential lenders that your previous creditor took steps to protect themselves from your getting further into debt with them. That resulted in them closing your account. This normally doesn’t happen unless you are not taking care of your account properly. If it is your desire to keep a good rating you will want to try and avoid both of these situations.

Probably the best thing you can do if the option is available is to consolidate by using some of the equity that is built up in your home. With this type of collateral you can get the money to pay off your creditors in full. This is always the best for your credit rating. You can then, if you so desire, request to have your accounts closed. Be careful with that though as sometimes when you do this your credit will actually get a slap. It has happened to me in the past. Many times it is best to just leave the account open but discontinue using it, that way your available credit increases but it shows responsibility to creditors when it is not used.

Probably the last thing that you need to be careful of is scammers. There are a lot of them out there today just preying on people who are in what seems to them “desperate times”. These companies will make all kinds of promises to save you and take care of all of your bad debt but once they get your money nothing happens. Beware of companies that require payment up front, and always check out the company with the Better Business Bureau for the area that they serve.

Be very wary of whom you give your personal information out to. Always get everything that is said or claimed in writing. Extreme measures are probably not necessary if you are dealing with your local bank, although the “in writing” part is, but if you are dealing with companies over the phone or the Internet you need to be extremely careful. Always stay in contact with the company and make sure that they deliver on their promises.

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