HEADLINE:

Up To $25,000 To Pay Off Credit Card Debt

What is the meaning of this? Here's a translation: we're going to give you a loan (debt) so that you can pay off your loans (debt). The company that wrote this headline knows that many consumers want (and need) to get out of debt. They use this knowledge against you by offering you one more way to acquire debt! One key for credit card companies and banks is to UP-SELL you to take on MORE debt than you currently have when you apply for one of these loans. (For more information on the "up-sell", see the next chapter.) Another trick that they use is by offering you a fixed term of up to 96 months to pay off the debt! This may sound great to some, but to the banks it is simply a way to increase revenue. The longer they can stretch out the principal balance, the more money they will make. Remember, a low monthly payment for you means maximum profit for the Credit Card Company (or bank).

Credit card companies and banks are masters of marketing. They can make a loan deal, no matter how horrible the terms, seem like an amazing deal. I get these offers for $25,000 and $50,000 unsecured loans all the time. In some (perhaps rare) cases, these deals might actually help someone. The key for you the consumer is to know exactly what you are doing, and know how to use these offers to your advantage (and how not to use them). Home equity loans are another common type of debt consolidation offer that may not be good for many consumers. According to the Experian/Gallup personal credit index in February of 2007, only 5% of home equity loans were for the purpose of paying off credit card debt, and 12% were to consolidate debts in general. Most people that get these loans do so with other things in mind. Your bank will most likely try to sell you on higher loan amounts than what you need.

Next time you receive a loan offer in the mail, ignore the headlines and read the fine print. Remember that it's the things that they DON'T ADVERTISE that you need to watch out for—and that all these ads you receive aren't created by someone who is looking out for your interests, but instead are created by a marketing department that exists for the sole purpose of making the credit card company more money.