Today we’ll continue our series of posts on debt consolidation. Here are some things to avoid when you are considering consolidating your debt:

Debt Consolidators Who Will Do It All
Debt consolidators are great at boasting about what they will do for you. They say they’ll lower your interest rates, reduce your monthly payments, negotiate with the creditors. And they’ll do it all for the easy payment.

Usually debt consolidators charge a fee that is included with the monthly payment you are paying. This is usually 10% or 15%. They give your payment to the creditor who then in turn, gives them their fee out of that payment.

Why pay someone to do what you can do for yourself? You can talk to creditors and lower interest rates just as well as they can. The difference is, 100% of the money you pay towards your debt will go towards your debt – no third party will be taking any of it.

Debt consolidators can make it sound like it’s worth it when they tell you the dire situation you are in. They may tell you that it’s going to take almost the rest of your lifetime to pay off the debt with the payments you are making without them. They then turn around and tell you that you can do it in two or three years using their services. Who wouldn’t want to run to them to handle our finances? However, there are many valuable services available online where you can plug your debt into an online calculator and it will tell you – honestly – how long it will take you to pay off your debt and what you can do to reduce this time.

You must also do extensive research on debt consolidators as they have been known to make late payments or even miss payments, damaging your credit history even further.

The Balance Transfer Trap
It’s relatively easy to obtain a low-interest balance-transfer card but these rates only last for a limited time. At that time, you usually need to switch to a different card. The biggest problem with this is that all of the activity can taint your credit history.

If you want to use balance-transfer for a few months, just be sure to close the accounts yourself. Contact your credit company and ask that the account be marked “Closed at customer’s request.” If you don’t, it will look like the creditor closed your account and that will also make you seem high-risk.