Can you trust those ads, "Help you get rid of debt"
June 1, 2009 4:02pm CST
Can you really trust those ads on radio, and television, or even the internet, that they claimed to help you get rid of your credit card debts and personal loan debts, by greatly reduce the monthly payment. Would you trust their motives just simply to help people this way? Somehow I just doubt it. They are running a business too, they find it a perfect opportunity to make money from people who is desperately seeking debt - help. What do you think of it?
• Hong Kong
3 Jun 09
I think that there should be some companies that can actually help you with credit card debts. The fact is the interest rate of credit card is high... No, it is TOO high. Banks are loaning money to your through your credit card with no securities as back up and you do not need to apply for a loan explicitly (other than the application of the credit card). Now, for those who claim to get you out of debt, they will check your ability to repay debt before lending money to you to offset your credit card debts. In addition, they may have more resources to make sure you can payback your debt (like you have to offer something as security to backup your loan). With all the troubles they are going to cost you, you are given a loan at a lower interest and hopefully in a longer period of time. Thus, the monthly payment is lower and you can clear your credit card debts.
4 Jun 09
Even though you say they might be able to give you a loan at a lower interest rate, you also point out that you're in debt for a longer period of time. When you add up the lower payments over the longer term, you end up paying out even more money than you would have paid if you'd stuck to a simple budget and worked at paying off your debts properly the first time, rather than aiming for a consolidation which doesn't fix the spending problems in the first place. Example: If you open a new loan for 5 years, that's 60 months. Multiply your new 'lower' monthly repayments by 60 months and have a look at the real cost. If you borrow $6,000 to pay out credit card debt on a personal loan at 8.5%, then your new repayments should be $123 a month. $123 a month multiplied by 60 months = $7,380 That's a lot of extra money to be paying off over a lot longer time! The most effective way to get rid of credit card debt is to stop spending on it NOW and then make payments that are higher than the minimum payment due. Do this and the balance should be cleared MUCH quicker than 5 years and cost you less than $7,380 in the long run anyway.
22 Aug 09
Absoultely you are right my dear, it is very bad to get into debt and if you think you have a problem you must be very careful with your money until you can find a nice young man to pay all your bills for you. It is not wise to use a credit card, it is best to wait and then use the young mans credit card so that you do not get into this bad debt.
3 Jun 09
These companies are consolidating your old debt into a new loan. When you work out the repayments on your new loan, they might look lower on your monthly payment - but you need to remember that your loan term starts all over again, so you're in debt for longer. When you add up the amount of money you'll end up paying in total over the entire term of the new loan, you end up paying far more in the long run. These companies are paid a commission by the lender to help keep you in debt for longer. :)