Common Myths About Debt Consolidation Programs

1. Common Myths About Debt Consolidation Programs

2. A lot of people are coming up with the wrong assumptions about debt relief because they are confused about the similarities and differences of each program. Debt consolidation is probably where most consumers are having a difficult time understanding because it is such a broad debt relief term to begin with. Debt consolidation simply refers to the efforts of a debtor to simplify their debt payment methods by combining their funds into one manageable payment scheme. The goal is to make the process easier so as to make debt relief more attainable. The two words alone does not necessarily signify debt consolidation loans. Not all consolidation efforts need a loan to make it possible.

3. Credit Counseling/Debt Management Plan Myth: All programs are the same. Fact: The general idea of debt consolidation may be the same but the details will vary depending on the unique situation of the debtor. It is very important that you identify your financial weaknesses and strengths and discuss it with your credit counselor. This will help you come up with a plan that is suited to your capabilities and will have a higher chance of success.

4. Myth: All credit counseling agencies are non-profit organizations. Fact: While most of them are not for profit, there are companies who offer paid services. They are still legitimate but be sure to conduct your due diligence to be certain.

5. Myth: Credit counseling agencies have varying creditor payment methods. Fact: The creditor benefits have been standardized throughout the industry so you will rarely find a company that offers a better one. However, your credit counsellor will aim to provide you with a payment plan that you can afford to pay for. Should you be unable to afford that, your chances of getting a lower scheme with another credit counseling agency is low. Instead of searching for a different company, you will also be advised to shift to a different debt relief program altogether. Debt settlement and bankruptcy are two other options that has a lower monthly payment plan.

6. Debt Consolidation Loans Myth: A collateral is always needed. Fact: You do not need a collateral to avail of a debt consolidation loan. However, there are benefits to be made when you avail of a secured loan like lower interest rates. This is probably why a Home Equity loan is the most pursued type of debt consolidation loan.

7. Myth: You need a good credit score. Fact: Like a collateral, a good credit score will help you acquire lower interest rates but it does not define whether you will be granted a loan or not. Even those with bad credit scores can still opt for a debt consolidation loan as long as they have the means to pay for it and the overall monthly amount is not greater than the current. Myth: A loan is the best way to get out of debt. Fact: There are other options to get out of debt and each of them are best for particular financial situations. It is still best to consult an expert about it or at least analyze your finances carefully to know what is the best debt relief option to take.

8. Sources: • http://www.youtube.com/watch?v=fKsW-CHhHQk&list=PL5D14FDFFD9281849&index=18 • http://www.linkedin.com/company/fix-the-debt-campaign • http://www.ezinearticles.com/?Common-Myths-About-Debt-Consolidation-Programs&id=7395052/