Debt consolidation is your best option for repaying a number of debts both credit cards and personal loans. There are several options open to you under the umbrella term ‘debt consolidation’. Things could become quite challenging and complicated unless you understand the real implications of debt consolidation. And are aware of the debt consolidation facts and myths. We would be discussing some of the debt consolidation myths in this article for you to identify them and make an informed decision later.
Myth: Debt Consolidation Would Surely Get Rid of All Your Debts
This is a completely false assumption. Debt consolidation could be a great way of reducing what you are actually paying in terms of fees and interest. And really making it far easier for you to manage all your repayments promptly. However, if you are still using a credit card that you are currently paying down, or if you are unable to cut down your debts even during the no-interest promo period of a balance transfer card. You are surely going back into debts and collecting interests.
Myth: There Is No Difference between Debt Consolidation Loans
It is a myth that all types of debt consolidation loans are supposed to be the same. There are different kinds of debt consolidation loans such as the typical debt consolidation loan. That is designed for helping you consolidate all your existing debts. You would have the option of an unsecured personal loan that could be letting you pay down effectively your outstanding debt pretty much on your own. Home equity loan helps to consolidate your debts by using your house as collateral. Balance transfer credit card is also an effective way of consolidating debts from different or multiple accounts into one single credit card. The payments are typically done during the no-interest or low-interest period. Learn more by browsing through the debt consolidation reviews.
Myth: Debt Consolidation Is Cheaper than the Rest
It is quite a prevalent misconception that debt consolidation is the cheapest debt management technique. And that it would be instantaneously saving you thousands of dollars. Actually, it could be doing that provided you are watching out for loans. Which are known to be charging early repayment penalties and fees.
To ensure that debt consolidation would be working fine for you. You need to calculate the amount you would be paying for all your credit cards and loans in a month. You must examine the loan contract terms of each loan. See if closing the accounts could work for you.
Myth: Debt Consolidation Would Be Hurting Your Credit Score
This could be true but on a purely temporary basis. Debt consolidation may affect your credit score for a while but it would be gone without affecting your future. Debt consolidation may or may not knock down your overall credit score depending on the precise method you pick. For instance, when you take out a personal loan, it would be impacting your credit score in a different way as compared to a credit card that has balance transfer available.
It is important to have an idea about the debt consolidation myths and misconceptions so that you are able to make the right choice. You must take care of your current debts to prevent them from impacting adversely your future.