Are you going through a hard time because you have the pile of loans to pay? People usually end up considering debt consolidation – a loan that you take to pay off many other loans. The question is “does debt consolidation really help you?” Well, yes!
Debt consolidation program lightens your burden and helps you to pay the debt in a much easier way. However, there are a few myths about debt consolidation that most of us misunderstood what consolidation exactly is. Following are the 5 facts which clear your concepts about debt consolidation and help you to pay loans with a low-interest rate.
1. Debt Consolidation Helps You Pay Off The Loans
What most of us know is that debt consolidation erases the debt you owe. The truth is that it helps you to merge loans in one simple payment with a lower interest rate so it becomes possible to get rid of your loans gradually. Basically, it makes a bundle all of your loans into a new one so you can pay off the existing loans you owe through monthly payments and low-interest rate.
2. Debt Consolidation Means Having A New Lender
Debt consolidation procedure is usually done by a third-party payment system. When you consolidate your debt, you get a new lender instantly. Hence, you start paying to the company or agency you are working with and then they pay to your creditors. They usually have good relationships with financial lenders so they can get lower interest rates from the lenders.
3. Know The Difference
There is a difference between debt consolidation loans (unsecured loans) and secured consolidation loans. A debt consolidation loan is a loan which you take to pay other outstanding debt, it is based mainly on your credit card history. Secured consolidation loans use your assets like a property or house as ancillary.
4. High Credit Score
A debt consolidation program offers you lower interest rates. However, those rates may not remain the same if you don’t have a high credit score. So, make sure to do proper research and ask the agency what your exact interest would be. Some good rates are available for a certain amount of time, so make sure that you know what you are getting yourself into.
5. Debt Counselling Agencies Are Not Always Non-Profit
Another factor that most people misunderstood is that all debt consolidation companies are non-profit. Most of the companies are nonprofit organizations according to the Consumer Financial Protection Bureau, but some of them charge fee. In order to keep the business running, the agencies charge upfront fees for debt consolidation or administrative fees for their services. But, it is not about choosing a profit or nonprofit organization, it is all about who can help you make your debt payments more easily and in an affordable way. So, you must seek for a professional help to get rid of piles of loans. Do research about both kind of credit counseling agencies to choose the best for yourself.
