Avoid Top 5 Mistakes When Taking Out a Debt Consolidation Loan
1. Choosing a debt consolidation lender for the wrong reason
(e.g., the lowest rate, your existing lender) :-
People choose lenders who provide debt consolidation loans for all the wrong reasons. Getting a low rate is important, but it's not the only consideration when you want to take out a debt consolidation loan.
Lenders may offer the lowest rate but charge extra fees (loan fees, origination fees, copy fees) so that in the end you'll pay more for the debt consolidation loan even though your rate may be lower.
The only way to protect yourself is to wait for the
Good-Faith Estimate (GFE) which should list all the closing costs. Compare the GFEs from a number of debt consolidation lenders.
It is not the only story when you want to take out a debt consolidation loan. If time is important, you want to choose a mortgage company that is capable of acting quickly. Ask each company to give you their average closing time for loans similar to yours. Remember to specifically ask about debt consolidation loans.
Ask around among your trusted friends. Find out who took out a debt consolidation loan lately and ask them what they thought of the company. Don't assume that your existing lender is any better than a new lender.
Since most loans are sold in the secondary market, everyone has to meet certain criteria, and your existing lender will probably require the same documentation as a new lender.
However, once you have a commitment from a new lender, it doesn't hurt to ask your existing lender to beat it. Often times they will.
Once you've finally decided, there's one last step before taking out that debt consolidation loan. Call the Better Business Bureau and find out if there have been complaints against this mortgage company or against this Loan Officer.
2. Get everything in writing
when seeking a debt consolidation loan.
Get everything in writing. No matter what the Loan Officer tells you about your debt consolidation loan, ask him/her to confirm it in writing. Don't believe someone when they tell you that your debt consolidation loan rate is guaranteed. Get it in writing.
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