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From the Experts at

3 Debt Consolidation Traps to Avoid

by Lucy Lazarony

Debt Consolidation Traps

Looking for smart ways to consolidate credit card debt? Watch out for these three debt consolidation traps.

1. Forgetting to Pay Minimum Card Payments

When consolidating your credit card balances on to a new card, don’t forget to pay the minimum payment on each of your credit cards. It may take up to two weeks to process a balance transfer and if you don’t make the minimum payment on each of your cards, you could be charged late fees and a late payment will appear on your credit report too. Even after a balance transfer goes through, you’ll want to double-check the balance on each of your credit cards. If it says anything other than zero, you’ll need to make a payment by your due date or — you guessed it — be charged with another late fee.

2. Applying for Several Loans at the Same Time

If you think you’re being a smart shopper by applying for several consolidation loans at the same time, think again. Every application for a personal loan triggers an inquiry into your credit history and each inquiry lowers your credit scores a little bit. Apply for several debt consolidation loans at the same time and your credit scores could really drop.

Begin your loan search by checking your credit scores using’s free Credit Report Card. Next, ask a potential lender about the minimum credit score required to qualify for a loan. Some lenders will list this information on their websites. Once you’ve studied lenders’ credit requirements, choose one that will work with your credit history.

3. Falling for an Online Debt Consolidation Scam

There are plenty of scam artists posing as online lenders offering consolidation loans to people with little or damaged credit. These sites may charge upfront fees or ask for several months of payment in advance. Avoid these less than reputable lenders. Only apply for loans from lenders you trust.

If you find a good online deal for a consolidation loan, be sure to check the background of the company rigorously. Check to see if a lender is registered to do business in your state (legitimate lenders will be) by contacting your state Attorney General’s office or your state’s Department of Banking or Financial Regulation. Also check with the Better Business Bureau. Does this lender have a slew of complaints filed against them? If so, take your loan business elsewhere.

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  • Meet Our Expert

    lucy_lazarony GravatarLucy Lazarony is a freelance personal finance writer. Her articles have been featured on Bankrate, MoneyRates, MSN Money, and The National Endowment for Financial Education. Prior to freelancing, she worked as a staff writer for Bankrate for seven years. She earned a bachelor's degree in journalism from the University of Florida and spent a summer as an international intern at Richmond, The American International University in London. She lives in South Florida.
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