Last month the National Endowment for Financial Education (NEFE) warned consumers about the potential dangers of debt consolidation loans.
According to NEFE, more than half of Americans have debt that they are worried about and about three quarters of all Americans have debt. While some Americans are looking for ways out of debt on their own, others are looking for help, and some are turning to debt consolidation loans.
NEFE is warning debtors, including those in Minnesota, to enter any debt consolidation loan with full knowledge of what they are getting into before signing the loan documents. Specifically, NEFE is warning people with debt that ads for debt consolidation loans may be misleading and may focus only on the lower monthly payments without fully disclosing the higher interest rates and longer terms of the loan. In other words, a debt consolidation loan may lower monthly payments but add to a person’s overall debt. At the same time, some terms of the loan may not be made clear to the debtor. For example, appraisal fees may not be disclosed, and the fact that higher interest rates may be imposed for late payments may not be shared with the person obtaining the loan.
NEFE is encouraging people who are in debt to educate themselves about all of their options and to understand the terms of any agreement they enter. Our Minnesota debt consolidation attorneys recommend the same thing. We want you to be confident that any move you make to ease your debt burden is in your short and long term best interests.