If you have opted for a number of loans at the same time, it becomes a hectic task to manage its timely repayment. Not only is it a hectic task, but also you may struggle with proper financial planning. In this scenario, the best way to manage your finances is to opt for debt consolidation services.
It merges all your scattered repayment into a single and manageable one. However, there are myths about debt consolidation services. Don’t get confused with the services for we have broken down for you to understand it better.
What is debt consolidation?
A debt consolidation loan can be taken when you want to combine all your financial obligations into a single loan and repay it as per your income to livelihood ratio. Most of the debt consolidation loans have different interest and tenure. Before interest is levied on you, the lender will try to make a settlement between you and the main financial body from where you have taken the loan.
Generally, people take this loan as it lowers the monthly payment amount and prolongs the time. There are also few institutions, which negotiate the actual interest rate with the main body, so that you almost pay the actual amount you have taken. You can read about different financial services from Point Break Financial reviews for better decision making.
Debunking the myths.
Myth 1: Debt consolidation loans breaks your bank account
A lot of people over analyse whether they should go for more loans or not. This loan is absolutely fine to take as it eases the financial burden. Most of the time any financial body be in banks or money lending institutions they charge higher interest rates and you end up paying almost 3x the amount you have borrowed.
With debt consolidation loan most of the time you only pay minimal interest with maximum time limit. This way you can manage your finances better and plan in a better way to invest the funds.
There are number of lenders who charge no extra fee for their loan. While there are few that only charge service fee for processing your application. Before opting for loan, you must check the credentials of the company.
Myth 2: Debt Consolidation affects your credit score
Most loans require a credit check before disbursement. In case of debt consolidation, often these credit checks are rigorous and may bring down the score, but only for few points. Moreover, after two to three months of repayment of your debt loan payment, your credit score will be back to normal. It is advisable to manage your finances better than thinking about your credit score.
Myth 3: Debt consolidation loans will reduce your loan amount
Debt consolidation is different than debt settlement. In case debt settlement the debt settlement company negotiates with the actual lender to half your loan amount based on your financial condition. There are financial lawyers present in the process who proves over the period of time, that your present situation is not favourable for you to pay your loans. While on the other hand debt consolidation is a single loan with lower rate of interest, which gives you breathing space to solve repayment of the loan.
