Among the bad ideas when dealing with debt consolidation is taking a hard-money debt consolidation loan.

The biggest myth about consolidation loans is that they are very easy to get. I imagine if you decided you need a debt consolidation loan it’s because you have already missed one or two payments and your credit history is far from perfect. So, here you have a major problem.

If you are in the bad debt risk category, the debt consolidation agency may promise you an easy – to – get debt consolidation loan, and lower your monthly payment. However, they may raise your interest rates fro 21-22 percent, or higher (higher than you were paying before consolidating). Eventually, you’ll have lower monthly payments, but end up paying longer and much more. Another big myth about debt consolidation is that a debt consolidation agency will take care of absolutely everything for you, and you don’t need to move a finger to become debt free. All you have to do is transfer the monthly payment on that agency’s account and they distribute the money among your creditors. For a symbolic fee. Do bother to find out what monthly fees they charge, because in many cases it is 10-15 percent of each monthly payment. That means that out of each $400 you will be paying them $40 every month. Yes, they promise to negotiate with your creditors about lower monthly payments and lower interest rates, but they’ll be ripping you off every month. The question is why pay them for something you can do on your own? Can’t you negotiate with the creditors, one at a time, about the stretched out schedule of payments, lower interest rate, a different repayment plan? You can do it yourself if you dedicate some time to studying the procedure and techniques, work out a self-repayment plan and pay out the highest interest rate debts first.

Beware that when you talk to the financial agents they know how to influence your decisions. They will make complex calculations and tell you that you are in a very sad situation, owing so much it will take you 36 years to ay off. When you get desperate they will tell you there is a way out, and not that difficult after all. They can consolidate your debts so that it will only take you 4-5 years to pay off. Isn’t it a miracle?

So, before you talk to the debt consolidation agency get ready for the conversation. Use an unbiased debt consolidation calculator (for example, MSN Money Debt Consolidator) – unbiased means they don’t charge you any fees.

Another fact about debt consolidation agencies you should know about – they are known by making late payments, or even miss payments (of course, not all of them, but the facts don’t lie). No need to remind you how it can affect your credit record.

So, after you study thoroughly your situation and methods of debt consolidation, ask yourself a question – is it worth paying someone else for something you can do on your own? Or if you are sure you need the services of a debt consolidation agency – have you chosen well?