Debt Elimination Fraud
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Consumers should beware of debt elimination fraud when seeking ways to pay off credit cards and installment loans. There's an old axiom which says, "If it sounds too good to be true it probably is." Companies that make claims of wiping out mounds of consumer debt at the wave of the hand are no doubt taking advantage of desperate debtors grasping at any offer for relief. However, wise consumers will avoid companies that promise a flash-in-the-pan fix for money woes. Reputable firms usually present reasonable debt resolution plans within reasonable time frames and terms. It takes months and years to accumulate money problems and getting out of it won't happen overnight. Companies that claim fast results may be practicing debt elimination fraud, so buyer beware! The Bible warns against placing confidence in men's schemes. "Beware of dogs, beware of evil workers, beware of the concision. For we are of the circumcision, which worship God in the spirit, and rejoice in Christ Jesus, and have no confidence in the flesh" (Philippians 3:2-3).
Debtors should take a realistic look at relief options offered by companies motivated to take advantage of cash-poor consumers. Many agencies offer the opportunity to consolidate unsecured credit card and installment loans debts by bundling those smaller accounts into a larger secured loan, usually a home mortgage. But is it really wise to risk losing a home just to pay off a few charge accounts? And does anyone really want to pay for a three-piece suit or a weekend vacation for thirty years? That's what it amounts to when consumers take a close look at programs designed to siphon revenue and line the coffers of businesses that major in debt elimination fraud.
How can consumers detect debt elimination fraud? Fraudulent practices include offering access to fast cash at high rates of interest; high risk consolidation of small unsecured loans using a home as collateral; and second mortgage long term refinancing to pay off short term installment loans. While everyone gets into a financial bind at times, some debt elimination fraud companies make a living from other peoples money woes. Title pawn shops loan money to auto owners and use the vehicle as collateral in the case of default. But the interest charged on short term loans makes repaying balances a daunting task; and some owners wind up walking away on foot. Payday loan companies offer quick cash at a hefty fee with the expectation that customers will repay loans in full with the next paycheck. Unfortunately, some customers fail to come up with the payoff and find themselves caught in the trap of dragging out interest payments while principal amounts continue to linger. While these practices are perfectly legitimate, often the end result is financial jeopardy with nowhere to turn.
Unscrupulous debt elimination fraud that requires homeowners to roll over short-term delinquent accounts into long-term home equity loans can wind up costing dearly. Borrowing against equity may seem like an ideal debt relief solution; but in actuality, the practice could put a homeowner out on the street. The purpose of a home equity loan is usually to eliminate a high interest first mortgage and free up some cash. The amount of equity is derived from subtracting a remaining mortgage balance from the appraised market value of the home. For instance, if the Davis' property appraises for $250,000 and the mortgage balance owed is just $50,000, Mr. and Mrs. Davis could apply for a $200,000 home equity loan. Once the first mortgage balance is paid off, they would still clear $150,000 less realtor fees and closing costs. A second home loan will probably be financed for a lower interest rate than the original note and at a smaller payment over a shorter term, perhaps 15 years versus the original 30-year contract. But homeowners should check with financial advisors before leaping headlong into a plan to repay money borrowed for unsecured loan repayment, especially charge cards. That three-piece suit could be easily repaid within months instead of being bundled with other small loans and paid out of precious equity. The plan might be too risky, and homeowners could wind up forfeiting the house if monthly notes fll behind.
Before signing on the dotted line for paid debt relief assistance, consumers should be careful to assess whether a short-term problem should be solved with a long-term risky solution, such as a home equity loan. Other means of debt reduction or resolution exist without the "strings" involved in securing a second mortgage or putting the homestead on the chopping block if borrowers default. The local bank or credit union may offer a signature loan of $2,500 to $5,000 to pay off long standing accounts without debt elimination fraud. Small loans are usually low-interest and can be paid off through payroll deduction over a three-year period. Selling some unused items on an Internet bartering site, at yard sales or community flea markets may also be a way to raise extra cash to eliminate long standing charge card accounts.
While consumers should beware of debt elimination fraud, there are legitimate companies which offer viable solutions to get rid of unpaid bills and clear up poor payment histories. Consumers should check with the local Better Business Bureau or reputable financial advisors and schedule an appointment with an agency to get a better idea about services offered. Eliminating debt will take time and planning. Debt resolution firms may advise paying off smaller bills one at a time, then applying extra money to each successively larger account until each bill is paid in full. Doubling up on monthly payments will also enable debtors to decrease principal amounts, instead of making interest-only payments. Once the bills start getting paid off, debtors will gain a new perspective on spending and hopefully, avoid getting entrapped and entangled again by uncontrolled consumerism.
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