Demystifying the debt consolidation myths

May 9, 2013 | By More

 

Demystifying the debt consolidation myths – Throwing light on the facts

Among all the financial plans that are available for the people with an overwhelming debt level, debt consolidation is probably the most valuable one. Although debt consolidation seems to be one of the most important debt relief options, it is also one of the least understood debt solution. In fact there are certain myths that encompass the entire debt industry and that is believed by the debtors who are going through stressed financial situations. In case you too believe in the debt consolidation myths, you should always take some informed decisions so that you don’t fall in a debt trap. Check out the most common debt consolidation myths that are believed by the credit card debtors.

  1. Debt consolidation is similar to debt settlement: This is a typical myth among the credit card debtors as they believe that there is no such difference between debt consolidation and debt settlement. But the fact is that both of them are vastly different ways of tackling your soaring debt level. While the former one includes paying off the entire debt amount, the latter involves paying off a portion of the outstanding balance instead of the entire balance. This is the basic difference between debt consolidation and debt settlement and you should weigh your options before taking any vital decision.
     
  2. It’s not possible to consolidate debt with poor credit: This is certainly a myth as it is pretty possible to consolidate your debt with poor credit score. Although the entire process might be tougher than a debtor with good credit score, but it’s not impossible. You might be offered sky-high rates on your consolidation loans but it is not that you won’t be able to grab a loan.
     
  3. You need to own a home to opt for debt consolidation: Yes, this is also a myth as you need not always own a home to opt for debt consolidation. The unsecured debt consolidation loans are some options that can be taken resort to when you don’t own a home of your own. Only when you don’t get an unsecured loan and you require taking out a secured debt consolidation loan, you should own a home.
     
  4. Debt consolidation hurts your credit score: They say that debt consolidation hurts your credit score but this is not the fact. Initially when you sign up with a program, it might have a mark against you on your credit report but once you start making the payments, you can soon increase your credit score. However, another instance that might hurt your score is when you default on the payments after signing up with the debt consolidation program. So, try your best to make timely payments in order to avoid a hit on your credit score.

Therefore, when you’re wondering about the ways in which you can combine your debts into a single monthly payment, you may choose debt consolidation. Avoid believing in the above mentioned myths as this might help you take better informed decisions.

Category: Management related

carsten@officentos.com'

About the Author ()

Comments are closed.