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Myths and Facts Surrounding Debt Consolidation Loans

Credit card debt consolidation is a great financial management strategy that results in more manageable repayments. Understanding the fundamental principles behind debt consolidation loans enables debtors get out of financial hardships in the easiest and fastest way possible. Sadly, there are still individuals who fall into more difficulties while in a debt consolidation program. In order to become useful, you will need to understand how it works by debunking misconceptions and learning about the straight facts about this approach.

  • Myth 1– Credit card consolidation is synonymous to debt management, settlement, and bankruptcy

Fact– Although the above mentioned terms are being used interchangeably, debt consolidation features a host of qualities that make it a more desirable option among debtors.

The processes of debt management and debt settlement typically involve the acquisition of services from financial counseling firms. They assist in reducing the total amount owed so debtors can make payments in a timely fashion. Bankruptcy on the other hand is a proceeding which involves clearing an individual of his debts due to serious financial hardships.

These strategies may seem beneficial, but they do however, negatively affect the credit score.  On the other hand, debt consolidation simply means placing all debts together and repackaging them. Usually debt consolidation comes with lower interest rates and payment schedules that are more amenable to the debtor.

  • Myth 2– A credit card consolidation is an effective means to save money

Fact– Companies that offer debt consolidation services for unsecured loans such as credit card debts cannot guarantee savings to clients. Our credit card debt consolidation programs assist customers by repackaging all the debts in that they can be given a lower interest rate instead. In addition, we can also make arrangement with the debtors regarding late fees and payment schedules. These strategies may not reduce the total amount owed, but are successful in making the repayment process more desirable as well as highly manageable to debtors.

  • Myth 3– A debt consolidation program for my unpaid credit card bills will still hurt my credit standing

Fact– A credit card debt consolidation program, if used accordingly, will not have a negative impact on a debtor’s credit history. Quite the contrary, being in a debt consolidation program is proven to help debtors in improving their credit score. By paying small unsecured loans consistently until the paid is full, a debtor’s credit score is known to increase as well.