Consolidating Debt is a great idea for those who are struggling with making their payments or need a lower interest rate. For many people, the idea of consolidating your debts can be considered a failure of managing your finances. This assumption just isn’t true, as each person’s situation is different. Here is a list of three more incorrect myths about consolidating debt.
Consolidating Removes Your Debt
Some people believe consolidating your loans means you are completely forgiven, and no longer have to pay at all. But, consolidating loans means,
- You can be offered a new repayment plan that better fits your budget.
- You will no longer pay to any of your previous creditors, and will only pay to the one you consolidate with.
It Ruins Your Credit Score
This misconception depends on a handful of factors, including:
- How much will you be paying on each of your loans
- How consistent are your payments going to be
- What type of loan will you be accept after your request to consolidate your loans.
These factors do matter and it is important to ask as many questions before consolidating your loans.
You are Really Getting Into More Debt
Because every situation is different you must have a clear understanding of:
- How many loans you have under your name and at what interest rates are they each set at.
- Realistically, how long do you want to be paying off your loans and how much you can realistically afford to pay?
- Which type of new loan would you like to have under your consolidation plan?
Not every bank or credit union will offer the same loans, it is good to do some research ahead of time. Research government owned websites for trust-worthy information on financial advice. Contact us and get the answers you need today!