Debt Elimination Loan
by Paul Smith
Maybe you've gotten these in the mail too. They all sound so enthusiastic about helping folks, just like you and me get out of debt. Utter lies.
The reason is because the phrase, "debt elimination loan" is total and complete oxymoron.
In other words, it contradicts itself. Sure, I understand the idea, you are getting a loan to get out of debt. Uh, right.
Think about that for a second. How does getting a loan get you out of debt?
Well, in an of itself, it doesn't. Not at all. The only thing a debt elimination loan does is move your debt around and believe me when I tell you, that this, in and of itself, will do NOTHING to help you get out of debt.
Most certainly, it will not "eliminate" your debt.
What a debt elimination loan WILL help you with however, is to better manage the debt you already have so you can pay if off quicker, with less interest and greater efficiency.
This would be known as a consolidation loan. Which of course is what a debt elimination loan is. It's just been re-branded with a more "fantastical" sounding word, "elimination" in order to entice you even more.
Well, now that we've removed the fleece from what is otherwise a consolidation loan, what next?
There are 5 very important things that you must take into consideration when thinking about consolidating credit card debt.
1) Beware of the advertised interest rate.
MANY lenders do not give everyone the same rate. This means that the really small rate in big numbers on the front of the advertisement may not apply to you.
Sure, you may be pre-approved, but not necessarily for the rate being advertised. Read the fine print! Your rate may vary depending on the results of a credit check...AFTER YOU APPLY.
2) Beware of any "conditions" on the loan
This is where I tell you to, read the fine print! Seriously, you need to. If sitting in a bank with a loan officer and they hand you a massive form with lots of small print on it, politely thank them for their time, take the form and leave.
Do not sign that thing right then and there
Would you believe that many lenders make more money per year in fees and other expenses than they do in interest on your loan? No I'm not kidding. Read the find print. You won't regret it!
3) Beware of rate hikes
What happens to your consolidation loan if you are just one day late on your payment? What happens when the "prime rate" goes up? What happens to your loan if you die?
If the debt elimination loan company can't provide these answers or they can't be found in the small print of their form, consider this a major red flag and go somewhere else.
You do not want a consolidation rate that is variable and changing like the wind. Read the fine print. Ask questions. Know what you are getting into.
4) Forget about the low payments
If you are being convinced of doing a debt elimination loan (sorry, consolidation loan), out of the fact that you will have "lower payments," go somewhere else.
Lower payments will not help you get out of debt. If you are serious about eliminating debt, you shouldn't care about the low, low payments. You only care about how high the interest rate is.
5) What are the restrictions
Be sure there are no "pre-payment" penalties. Let's say you come into some money and you want to pay off your consolidation loan. Can you? If you can't, don't do this loan.
Also, what happens if you make double payments in a given month? Is there a fee? Does the payment go to principle?
You want a loan that will let you pay off early, make double payments (that go to principle) and one that does not charge you a fee to do either.
While the above five tips are important to remember, above all else, don't just trust anyone for what they say, ensure that it's in writing. Never forget that a consolidation loan company doesn't care that you want to get out of debt. They only want you money.
That knowledge should help you keep things in perspective when considering a debt elimination loan, err, consolidation loan.
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