Don’t Fall For These 3 Debt Consolidation Myths

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A debt consolidation loan can help you make paying off your debt easier. (iStock)

If your personal financial goals include paying off outstanding debt, consolidation is one solution to consider. A debt consolidation loan allows you to consolidate your credit card debt and other types of debt into a single loan for individuals.

Although you could open a credit card with a balance transfer of 0% per annum For debt management, consolidation using personal loans can provide several benefits. For example, you can exchange the variable interest rate on credit card debt for a fixed interest rate. Lowering your interest rate can save you money over time. And when most of your monthly payment goes to the principal, you can pay off debt faster

But there are some myths about debt consolidation that can keep you from getting a personal loan.

3 myths about debt consolidation

Here are some of the biggest misconceptions about debt consolidation, as well as some tips for how to choose a loan for debt consolidation

  1. It damages your credit score
  2. Debt Consolidation Will Reduce Debt And Save Money
  3. Debt consolidation takes a long time

1. It hurts your credit score.

Maintaining good FICO score important when borrowing money. The better your credit history, the easier it is to apply for a loan.

It is always important to research personal lenders, especially if you are worried about your credit score. Use online marketplace like Credible to make sure you get the best rate and lender for your needs.

HOW TO GET A DEBT CONSOLIDATION LOAN WITH A BAD CREDIT

A common myth about debt consolidation is that it will damage your credit history. It is a fact that applying for a personal loan may require careful examination of your credit report, which can lower your credit rating by several points. But over time, debt consolidation can help improve your bottom line.

For example, if you use a debt consolidation loan to pay off your credit card debt, you can reduce your card balances to zero. It can improve your credit utilization rate, the second most important factor for FICO credit scoring. At the same time, paying off the personal loan you used to consolidate your debt on time can also improve your rating. If you are concerned about the impact of your credit rating on your outstanding debt, you can use a tool like Credible to check your credit and track identity theft

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2. Debt consolidation will reduce debt and save money.

One of the most common myths about debt consolidation is that it will automatically reduce your debt and save you money.

Debt consolidation – be it student loan debt, credit card debt, or other debt – does not by itself reduce your debt. Instead, a debt consolidation loan provides you with the means to pay off those individual debts. You will then make payments to the consolidated loan account.

Debt consolidation should not be confused with debt repayment, which allows the outstanding debt to be paid off for less than the amount owed. This option is usually only available if you are significantly overdue on your debt, which could seriously damage your credit rating.

If your financial goals include paying off debt while maintaining a good credit rating, debt consolidation is the best option. Although it is important to use personal loan calculator to estimate your potential interest savings. You can also paste some simple information into Free online Credible tool to determine if a debt consolidation loan is your best option

Depending on the term, amount and interest rate of your personal loan, it is possible that debt consolidation will not save you as much money as you expected. A visit to Credible can help you compare debt consolidation options to find best rates for individual loans for you, based on your credit score and credit history.

THIS IS HOW DEBT CONSOLIDATION HELPS EASILY MEETING PAYMENT OBJECTIVES

3. Debt consolidation takes a long time.

Another misconception about using a personal loan to consolidate and pay off debt is that it is a lengthy process. In fact, it is possible to apply for a personal debt consolidation loan online and get approved very quickly.

For example with Credible you can compare rates for personal loans from several lenders without affecting your credit score. Then you can decide which loan options you are interested in, fill out an application and upload all the necessary supporting documents. Once your loan is approved, the proceeds can be used to pay off credit cards and other debts.

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Consider all options for debt management

Debt consolidation is something to consider if you have credit cards or federal student loans and want to streamline your monthly payments. If you have other financial liabilities, such as mortgage debt or private student loans, you can try consolidation or explore ways to refinance debt instead.

For example, the decision to refinance your mortgage debt might make sense if you want to switch from an adjustable rate loan to a fixed rate loan. And you can refinance student loans to remove an applicant or take advantage of low interest rates. You can even refinance personal loans if you have outstanding loans.

If you are interested in debt consolidation or refinancing, experienced loan officers can be on your side. Visit Credible for answers to all your loan consolidation and refinancing questions.

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