Debt Management - Options To Avoid

Consolidating Your Debts

If you are a credit risk, a debt consolidator may entice you with promises of lower payments compressed into a single loan, but you'll end pay higher interest rates and fees than you're paying now. The reality is that you can accomplish the same thing on your own for free. Many creditors are willing to negotiate lower interest rates or reduce monthly payments and you can opt to repay the highest rate charges first to lower your overall expenses. Also, since the consolidator takes on the responsibility for forwarding your payments, if they are late or miss payments, your credit will be adversely impacted.



Tax Refund Anticipation Loan

Some people just can't wait for their money when they are expecting a tax refund so they get a refund anticipation loan (RAL). RALs are high-profit, low-risk loans marketed toward the working poor who sometimes don't even realize they are getting a loan when agreeing to an instant tax refund. Companies that offer them often lead consumers to believe they will have a long wait for their tax refund. In fact, the majority of Americans receive their refund checks within 10 - 14 days if they opt for direct deposit, making these loans very expensive for what you get.

Pawn Shops

Pawnshops may seem like a quick way to raise some cash, but if you really need to sell some of your stuff, it's probably better to do it yourself on eBay, Craigslist, or by having a garage sale. Many people mistakenly think that pawnshops are a good way to borrow money and then get their stuff back. In reality, a pawnshop may sell your item quickly and then give you only a very small percentage of the item's actual value.