People who are burdened with heavy debts usually get easily lured by attractive money provisions and debt relief schemes offered by financial institutions and local lenders. However, what seem to be easy and cheap solutions to your financial problems are nothing but traps that may cause financial pain in the long run. The best examples of such ‘easy solutions’ are the debt consolidation schemes that specially target people with huge credit card debts. These schemes are very tempting and difficult to ignore. Therefore, several people easily fall into these traps each year. In order to protect yourself from such dangerous, ‘shortcut solutions’, it is very necessary to remain alert and think twice before signing off any deal.
Some of the major debt consolidation traps that should be avoided are as follows:
The ‘Zero Percent Balance’ Transfer Card
Have you ever come across a mail or an advertisement that offered you a credit card with 0 % interest on all your balance transfers? Beware of such an offer. Although it looks great, it is nothing more than just another debt trap. On accepting any such offer, you would feel happy to transfer your total debt amount on to one single credit card with ‘0 % interest rate’. But, the fact that you might not aware of is that this special 0% rate offer is extended for merely 6-12 months. If you manage to repay your debts within this time, it is great, but if you failed to do so, the interest rates would be increased to double-digit levels, making your situation even worse than before.
Several financial services offer debt consolidation loans with low interest rates to tempt debtors with bad credit histories. As the genuine bad-credit loans attract very high interest rates, it is quite natural to get attracted to ‘easy loans’. But, what most people forget is that although the lender charges a low interest rate and reduces your monthly repayment amounts, he extends the loan term for an indefinite period of time. Thus, if you ignore the fine print while taking out a low-interest loan, you might end up accepting an ‘eternal’ debt.
Thus, before accepting any such ‘easy solution’, read between the lines of the terms and conditions. This will help you avoid falling victim to these debt consolidation traps.