Debt consolidation myths
you need to debunk
There’s no doubt that handling finances is an intimidating task. And if you fall in debt, things can seem to turn even worse. Having too many debts makes it even tougher. So, what can you do in such a situation? Managing the payments on a single debt is much easier than making payments on several debts in a month. You can thus opt for debt consolidation where the debts get rolled over into a single large debt. In addition, the interest rate gets lowered too. However, before you go on to consolidate your debts it is important for you to consider the myths associated with debt consolidation.
Considering debt consolidation myths
Below are the myths which are most commonly associated with debt consolidation:
Myth 1: Debt consolidation is no different than settlement or management
This is completely wrong idea and if you consider this idea to be true, you will end up taking wrong decisions.
In case of debt consolidation it is the interest rate which undergoes change. In addition, you are required to make regular payments on the debt and thus pay back the debt in full. The number of debts you owe gets consolidated such that you are required to deal with only one creditor. On the other hand, in case of debt settlement you are considered responsible to pay a part of the debt owed. That is with settlement it is the debt amount to be paid which gets lowered.
Myth 2: It isn’t possible to consolidate debt if you have bad credit
This is a totally wrong concept because there are various options through which you can consolidate debt. One is taking out a loan and the second option is balance transfer. You can also get the help of a consolidation company. It is only in case of consolidation loan when you would be required to have good credit. Otherwise, you may never be able to obtain a consolidation loan. However, if you opt for the other two it would still be possible to consolidate debts, with bad credit.
Myth 3: Debt consolidation has a negative effect on your credit
Debt consolidation does not necessarily have a negative effect on your credit. Only if you start missing payments can it have a negative effect on your credit. Moreover, you are not required to miss any payments in order to consolidate the debts. Rather, consolidation helps with the improvement of your credit. However, if you close down accounts after consolidation, it may result in lowered credit score. That is because, when you close down accounts, the total credit limit gets lowered all of a sudden.
Another very common myth associated with debt consolidation is that it is going to take time to get out of debt. However, this cannot be completely true as it depends on your ability to make the payments. If you can manage to make timely and more than minimum payments, it won’t take you long to become debt free. You need to be aware of these myths so that you can consolidate debts and improve your credit too.
We @debtwebinar.net believe that debts are manageable. All one needs is planning, information gathering, and discipline. We have listed down several tips and simple ways to deal with debt on our website.