If you have decided to do debt consolidation, then getting a debt consolidator may seem like the natural next step. Debt consolidators, of course, will make it all look very straightforward and give you the impression that all your debts can be neatly arranged into one that even looks lighter. Unfortunately, for a lot of people, this turns out to be a bad experience.



It is quite normal for people experiencing financial crisis to get loans that cover all previous credits. What people see is a debt consolidation loan that is processed with little hassle and a single lower monthly payment. People are easily attracted to this when they are desperate and do not give much thought to the actual implications.

If you would calculate how much you will end up paying via debt consolidation, you will find that it is actually a lot higher. Monthly payments are indeed lower but they stretch over a longer period of time. Again, if you look in deeper, you will find that interest rates are higher. They could be as high as 21% or 22% and unknowingly people get into a worst financial rut than they were originally in.

The debt consolidator also takes care of the coordination with all your creditors. Your job is simply to make the single monthly low payment. What people do not realize is there is actually a charge of about 10% of your monthly payment to cover this service. Money that could be well spent on paying the debts is now paid to the debt consolidator.

Then again, the debt consolidators are only doing their job and making a living out of it. The point is that with the proper information, you can also do it yourself. You can directly negotiatie with your creditors to work out manageable payment terms given your finanical difficulty. This will not have to cost you anything and you will find that most creditors will be helpful.

Another issue that has come to light is that there have been cases where debt consolidators themselves make late payments. They ask for regular payments from their own customers but remit them late. This incurs the customers extra charges of which they are not informed. These extras get added into the monthly payments and can go unnoticed. This is another reason why you may want to take this into your own hands.

Nowadays, another prevalent debt consolidation tool is balance transfer cards, which also promises low rates. Note, however, that this does not go on forever. They will increase after a few months. If you think you can get away with doing another balance transfer again and again, think again. The network of credit card companies will be able to see your history and consider you a risk and at some point your switching will not be approved. You will then be back to where you started and end up with high rates again.

Other options open to you will be home equity loans and even personal loans. Home equity loans are better options because of their single-digit interest rates. On top of that, they are also tax deductible. If you have a good credit history, you can try for a personal loan. The interest rate may still be high at about 11%, but this will still be lower than the more than 20% rate of the debt consolidators.

You can also investigate other options that may be possible. You can seek information and advice from organizations that provide credit counselling. Understand the concepts first. You can then handle the situation yourself. Do not be worried about being exposed to harassment by debt consolidators, as the Fair Debt Collection Practices Act is there to protect you.