Some Good Tips, Some Bad in ‘Your 3 Worst Debt Consolidation Moves’
By Brad McDonnell on Thursday, October 11th, 2007 :: 10:55 amCategory: Online Articles, Reviews
In a recent MSN Money article titled Your 3 Worst Debt Consolidation Moves, columnist MP Dunleavey described some of the traps laid out by the debt consolidation industry to snag debt-burdened consumers. Dunleavey referred to the industry as a “Covert Sting Operation,” attracting consumers into risky debt consolidation programs with enticing slogans promising fast and affordable debt relief.
The article identified three fishy debt-consolidation moves: bad-credit loans, for-profit debt consolidators and low-interest balance transfers. Dunleavey hit on some useful points about borrowing a loan with bad credit. Borrowers deemed a “credit risk” by lenders would often receive a consolidation loan with a higher interest rate than their credit cards, but the consolidator lures these desperate consumers with enticing promises of low monthly payments.
Dunleavey also warns about debt consolidation companies who “promise to take care of everything,” she writes. These companies negotiate lower interest rates and monthly payments but charge hefty fees to pass along their clients’ payments to creditors. Dunleavey poses the following question: Is it worth paying someone else to do what you can do yourself?
While the article provided some useful tips for people when seeking debt consolidation, Dunleavey seemed to contradict herself toward the end of the article. The third bit of advice she offers deals with avoiding low-interest balance transfers as a means to consolidate debt. Transferring multiple credit card debts onto one low-interest card can be dangerous because at some point all the activity damages your credit record, she writes.
Dunleavey offers several “better” debt-consolidation moves that seem to contradict her previous advice, including refinancing your car. I don’t know how refinancing your car loan is a safer way to pay off debt than transferring multiple balances onto a low-interest card.
Dunleavey then describes how she cured her struggles with debt by seeking the services of a non-profit credit counseling company. She recommends these organizations because they get paid by creditors, “so it’s in their best interest to work out a repayment plan rather than advise you to declare bankruptcy.”
First of all, I’ve never heard of a debt-relief company advising its clients to file bankruptcy. Second, how much trust can you put into a debt-relief company that’s funded by the people you owe money to. Creditors fund these companies to get consumers to pay back the maximum amount of their debt, not to help consumers receive the best debt-relief program available.
Author Bio: Settle your debts today! Read about debt relief from financial writer Brad McDonnell, who is an expert on personal finance topics involving debt consolidation.
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