Your credit card debt difficulties can be controlled if you opt for credit card consolidation. Credit card debt consolidation helps you to consolidate all of your credit card debts into one single but large debt with lowered interest rate. Thus, it helps you in paying off your credit card debts easily. However, you should know some true facts about debt consolidation to avoid hurting your credit and falling prey to scams.
Debt consolidation – 6 Myths and truthsImage may be NSFW.
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Some of the credit card consolidation myths and truths that you should know are:
Myth – You need to own a home so as to opt for credit card debt consolidation.
Truth – You don’t need to have a home in order to consolidate your multiple credit card bills. However, if you have a home and enough equity has built up on it, you may be able to take out a home equity loan and pay off your credit card bills. In this way, you will be able to consolidate your multiple bills into a single loan. Home equity loans are available for low interest rates and are thus an effective way to consolidate your debts.
Myth – You may incur more debts consolidating your bills.
Truth – It is true that you may incur more debts if you consolidate your bills. But you will have to control your expending habits and make more than minimum payments each month on the consolidated amount to pay it off.
Myth – Debt consolidation hurts your credit score.
Truth – It is not always true. If debt consolidation hurts your credit score will depend on whether or not you are closing down your accounts. Consolidation can rather have a positive effect on your credit score as you make the payments. However, if you close down your accounts after balance transfer, your credit score may be hurt.
Myth – Reduces the interest rate by half.
Truth – You can reduce your monthly payments with the help of debt consolidation as the interest rate is reduced but your outstanding debt balance cannot be reduced. If you opt for consolidation help, the consolidation company will negotiate with your creditors to reduce the interest rate on your debts and your multiple monthly payments will be consolidated into one single payment. This helps you in managing and paying off your debts relatively faster than usual.
Another very common myth about credit card consolidation is that it is the same as debt settlement. However, the truth is that debt consolidates reduces your payment amount by reducing the interest rate. In case of debt settlement, your outstanding debt amount is lowered generally by 40-60%. In addition, you should also know that if you want to save money through consolidation, you will have to pay off the debt as fast as you can.
