Be Aware of Red Flags When Shopping For a Debt Consolidation Loan

Many people today are fiscally overextended due to a variety of circumstances. Credit cards, car loans, insurance payments and numerous other bills total up to more than many individuals can financially handle. A good solution for home owners who find themselves burdened with excessive debts is a home equity loan. This type of secured loan allows individuals to borrow money based on the amount of equity that they have in their home. These financial products are often referred to as debt consolidation loans because their primary use is for centralizing all of a person's debt into a single loan with manageable payments. If you are considering taking out a consolidation loan it is important to be aware of factors that raise red flags of concern.

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Investigate the company's reputation. Ask friends, co-workers and business associates for referrals. If they have had a bad experience with a particular lending institution then the chances are greater that you may have problems too.
Does the written agreement match the verbal agreement? Keep away from salesmen who tell you one thing and then show you another. Either they are unsure of what they are talking about or they are trying to pull a fast one. One way or another it would be better to shop elsewhere.
Be aware that if your loan is sold you will typically be notified by your original lender. Beware of letters from unknown companies telling you that they have purchased your debt consolidation loan and all future payments should be directed to them. Make sure that this is not a scam before you send them anything.
Do not be persuaded by aggressive selling techniques. There are times that salesmen may use the unethical "hard sell" to persuade a customer to take a loan or to accept the credit life option. Be prepared to walk away if he makes you feel uncomfortable. Financial decisions should not emotional decisions and they should not be made under duress. Be aware that by law you have a 3 day rescission period during which time you have a right to cancel a home equity loan with no penalties attached.

A debt consolidation loan is an option that many homeowners should consider if they are currently saddled with large amounts of debt. Once your finances are under control it is important to have a budget in place to ensure that you do not fall back into financial habits which caused the initial problem.

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About the author:

Mark Carney is a professional consultant with First American Debt Consolidation and Loans, a debt consolidation service specializing in financial education, credit counseling, and debt management services nationwide.