When you find yourself in debt, if you are like most people there are three possible reactions you can have.
1. Ostrich. Bury your head in the sand and hope that if you ignore the problem it might go away. Many people in this group stop opening bank statements or any letters that look as though they might contain a bill or a demand for payment. They may even refuse to answer the phone. If you are one of these people, there is nothing anyone can do to help you until you face up to the problem.
2. Corporal Jones (most common). Panic, run round in circles and start having sleepless nights. In this frame of mind you snatch frantically at the first solution that presents itself. Many people will have sympathy with this but of course it doesn’t help.
3. Calm, cool and collected. Weigh up your situation carefully to work out the best solution. This sounds good but in practice it’s very difficult.
If you are in group 2, you are just the person that companies offering debt consolidation loans are looking for. You will see ads like “Instant Debt Relief!” “Cancel Out Your Debt!” These seem like a lifeline thrown out to a drowning sailor! But try and keep a hold on reality if you can.
• Ignore claims that are clearly ludicrous. Debt consolidation loan companies that make such claims simply want you as a customer and will promise anything to get you on board. If they offer “Instant debt relief”, common sense should tell you that this is not possible.
• Don’t believe anyone who says they can cancel out your debt entirely. Remember that whatever debt consolidation loan scheme you join, your debt is still there. The only thing it can do is help you manage your situation.
• When a company offering debt consolidation loans makes glowing claims about what they can do for you, ask for proof. Insist on a detailed breakdown of each step in the process. In particular, ensure you get the fullest possible information on exactly what interest you will be paying and the length of the loan term.
• Be very wary of a company offering debt consolidation loans, if they promise you that they can eliminate your interest payments. You may find that they have rolled your interest payments into your debt without making this clear.
When you are worried sick about being in debt, it is very difficult to make a rational decision. What you need is unbiased advice from someone you can trust to tell you the truth, such as an independent broker or financial adviser. A debt consolidation loan can help but it needs to be the right one. A broker can help you separate the wheat from the chaff, get access to a much bigger range of options, and guide you to the best deals.
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