Debt consolidation is an effective money management method where you can pay off your current debts related to your personal loans, credit cards, etc, by taking a single new loan. The main reason why many people choose debt consolidation is the fact that it helps in saving a lot of money.
One important thing that you must take care of when taking a new loan with debt consolidation is whether you are getting the loan at a low-interest rate or not. If you have to pay a higher interest rate, their debt consolidation may not be helpful to you as you think. Here are the steps involved in debt consolidation, which can help you understand the procedure easily.
- Taking a new loan.
- Clearing your existing debts with a new loan.
- Clear the new loan.
There are so many debt consolidation companies available nowadays, but the problem is finding someone trustworthy. Research well about the companies before dealing with them. You may have heard about the scam accusations on Ascend Finance. Don’t forget to read the article on Fox Chronicle to know the truth. It is an interesting write-up by Mac Venucci.
Debt Consolidation Myths
- Myth: 1: Pay less with debt consolidation.
Many people think that debt consolidation helps them in paying very fewer amounts. In fact, a lot of people often mistake it for a debt settlement. Both debt settlement and debt consolidation are different. Debt settlement is time-consuming.
Your credit score could suffer significantly, and you’d pay more in fees and taxes as a result. Your balance amounts remain unchanged as a result of debt consolidation. Simply put, you are consolidating several smaller loans into one larger loan.
- Myth: 2: Debt Consolidation Can Ruin Credit Score.
The fact is debt consolidation does not ruin your credit score. Whenever you apply for a loan, a fresh credit report query will arise. As a result, there would be little impact on your credit score. When it comes to credit score, it depends on various factors such as credit utilization ratio, payment history, and credit account age. In some cases, debt consolidation can actually help you by improving your credit score. With debt consolidation, it would be easy for you to make your monthly payment. This means, no more delay in making the monthly payment. As a result, your credit rating improves.
- Myth: 3: Debt Consolidation Is a Lengthy Process.
Debt consolidation is not a lengthy process. All you have to do for this is, find a lender who can process the loan for you. Choose a lender who can process the loan for you quickly.
- Myth: 4: For Debt Consolidation, You Must Pay more fees to the lender.
You do not have to pay more fees to the lender. However, a lender might charge a certain fee for debt consolidation which would be a very reasonable amount. This fee is also known as a lender fee or origination fee.
Try debt consolidation today to manage your finances easily!