Going For Debt Consolidation
There are many people having their financial status piled up with debts but getting limited options for them to get out of debts. For these people, it is rather recommended for them to go for debt consolidation which can be a fantastic choice for them to get over their debt burden. However, this is not going to work for everyone and prior for you to determine whether it is best for your needs, you will need to understand on something that most other people thought about when come to debt consolidation. You need to figure out the myths before going for it. The matter of fact, you may have seem to believe in some of these myths regarding debt consolidation.
Myth 1: Debt consolidation is similar to debt settlement and bankruptcy.
Truth: Debt consolidation is actually different with other programs. In fact, you shouldn’t call it a “program” but rather you should think of it as a strategic approach.
By choosing to go for debt consolidation, you are actually combine all of your debts and repackage them into a single debt. Debt settlement generally having something of negotiation with a loan company or mortgage counselor for the purpose of reducing the amount of your debt or lowering the interest rate. While bankruptcy is a legitimate approach which is getting involves with a judge.
Myth 2: Debt consolidation can cut down your debt.
Truth: Of course no, this not going to happen. In case you are having debts on your multiple credit cards and mortgage loans with a total amount of $50,000, when you are choosing debt consolidation loan, the amount of your debt will be still $50,000.
You should know that debt consolidation doesn’t re-negotiate, write off, settle, or cut down any money that you owe. Now you may think then what for you want to go for debt consolidation?
The advantage for debt consolidation is actually in case you have multiple loans at with high rates of interest, when doing repackaging of those debts and consolidated them into one single loan, you may enjoy a lower interest rate and also the amount of money you have to pay each month as the repayment period been extended to a longer terms. In other words, this indicates that you could either pay less every month or pay the same amount of money to make you get out of debt faster.
Myth 3: Will debt consolidation damage my credit score?
Truth: If everything work out appropriately, this is not going to have any impact on your credit report or causing a decreasing for your credit score. Actually, choosing for debt consolidation may even increase your credit score! This can be happen since you have been paid off a couple of smaller debts and your credit score will get improved every time a loan is paid off.
Myth 4: Debt consolidation needs to get assistance from an outside agency or a lawyer.
Truth: Even though you can get the consultation from a loan specialist agency or a lawyer to help in your debt consolidation programs, however you can also choose not to use them at all.
However, if you wish to combine your debt by yourself, you need to know something regarding on how to get it done as well as exactly what the choices are. Nevertheless it will surely be a do-it-yourself project for people to save money for not getting help from other party.
Debt consolidation is as well not really visible to outsiders. The credit bureaus, the bank as well as other parties would possibly not even know that you’ve go for debt consolidation.
Myth 5: Debt consolidation is not for those who know about financial management, but rather is for money losers.
Truth: This can be the myth that most far-out when come to debt consolidation. Actually, debt consolidation is a concept which is used in business and by the super-wealthy all the time. It’s a strategy for planning and also arranging the money you owe in a manner that will be most beneficial to you personally.
Myth 6: Debt consolidation is just ripping one to pay another and you are going to accumulate even more debt!
Truth: In fact, debt consolidation can be a good approach for you to clear your existing debts and getting a new debt. However, you should know that not all debts are carrying the same weight.
For instant, in case you are having a $20,000 debts plus the loan is taking place which mean you need to pay interest of 22%. Let’s say now I seeking help from my lending institution and managed to get a $20,000 with interest of 12%. While these two debts are of the same amount of $10,000, the 12% interest debt definitely is a more favorable deal for me. By shifting to the new loan, I will not have to pay the amount that I used to pay for my previous debt. And in case I am able to come out with the biggest payments, I am going to pay off my debt faster.
Myth 7: You need to be a homeowner in order to get debt consolidation.
Truth: Of course owning a home will give you an advantage compare those who don’t own any property when you are considering to consolidate your debt. (It not really matter whether your home have been paid off or still under repayment, as long as you own some equity.) However, in fact you are able to get a debt consolidation as well even you did not own any property.
Myth 8: Debt consolidation will restrict for me to get other loans in future.
Truth: Typically, it’s not possible in which anyone but a forensic accountant can determine that you combined the debt (if you don’t undergo any debt consolidation company which may leave a paper trail).
For those who take out a loan with a lender to repay for another, it is more beneficial for you to pay off the first loan first. By doing so you will be rather more likely for you to leave a paper trail of somebody who takes care of their debt properly. The chances are greater to allow you to be a favorable creditor.
Myth 9: Individuals who choose for debt consolidation will end up causing themselves to be even overwhelmed with their debt!
Truth: It’s completely feasible to choose for debt consolidation and then go to squadering and get your self in a jumble mess. That is why you’ll need great info along with a strategy to repay your current debt, take care of your financial situation now, as well as begin getting yourself ready for your monetary future.
There isn’t any reason that debt consolidation can’t work to get you out of debt, all that require is you must have a plan.
Myth 10: I can write off some of my debts with debt consolidation and stop bill collectors from calling me.
Truth: Let us take these one at a time.
Debt consolidation is different with bankruptcy that it won’t allows you to write off any debt. Any amount of your debt before you go for debt consolidation will still be the same amount that you owe after consolidate your debt.
Benefit For Debt Consolidation
The benefit for it will be you are now arrange it to become a more beneficial loan. Remember that you are not going to get your current debts write off or reduced! Now it is accurate you are able to come out with the plan to manage your debt(debt settlement allows you to reduce your debt while bankruptcy permits you to write off some debts) but you will need to pay for an extremely high cost. These two solutions are going to have an adverse effect on your credit rating, can make it tough for you to obtain loans in future, and will remain on your credit report for quite some time. Bankruptcy, in specific, can be a severe answer that entails a genuine court proceeding along with a judge who has the authority to make decisions on your financial status (such as forcing you to sell some equities to settle your debts).
You can only indirectly stop bill collectors by consolidate your debt. Let’s say you’ve a total of 6 debts and you been receiving calls from bill collectors all the time. In the event you consolidate your 6 debts into 1 debt with more favorable terms, you are now stand a better position to repay all of your debts. Once you do so, you can tell your bill collectors to get off.
Nevertheless, in the event you do not repay your new debt consolidation loan on time, definitely the bill collectors will come to haunt you again.