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Tips for Using Debt Consolidation Loans

Debt consolidation loans aren’t a ‘fix-all’ for reoccurring debt. There are many things to remember to make it work for you.

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Be aware that extending the period over which you repay your debt may mean that it will cost you more overall. Make sure you understand the terms, conditions and costs of the agreement.

Be wary of companies that may also offer to lend you an extra amount on top of your current debts. This is not generosity on their part: the more they lend you, the more you have to pay back, and the more money they make.

Find out information about the Debt Consolidation Company. How long have they been in the business? Ask for word of mouth references from family and friends.

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Read the fine print. You don't want to be tricked into signing anything. Take the time to read every single word of your agreement, and if you don't understand what you are reading, do more research and ask more questions.

Many companies that deal in debt consolidation loans force very expensive add-ons.
These add-ons can increase the amount that you owe by a very high percentage.

Debt consolidation loans are capable of damaging your credit to a great extent. Applying for a new line of credit and closing out older accounts can harm your FICO score in a big way. Ask what your score will be before and after consolidation.

Avoid companies that offer seemingly simple, ‘too good to be true’ consolidation options. They probably are.

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* Debt Basics is not a lender or broker. We provide information and research on debt help and debt consolidation. Product and service offerings differ by state.