For those looking for a fresh financial start, debt consolidation is a common option. This financial strategy allows people to take control of their credit card debts, combining them into one affordable monthly payment. In this guide, readers will learn the truths behind several consolidation myths.
It’s a Scam (No, Not Really)
While consolidation is a viable way to pay debt, it’s important to research the agency providing the service. The industry was dealt a few blows during the recession, as predatory lenders began to take advantage of desperate people. Look for a reputable company that’s been around for years, and be sure it’s a non-profit 501(c)(3) organization.
It’s the Same as Debt Management
Debt management and consolidation are similar, but there are a few differences to consider. When debt is consolidated, a loan is taken out, the debt is settled, and you repay the loan. With debt management, there’s no loan; instead of paying a lender, the client makes a monthly payment to a credit counseling agency that disburses it to creditors.
It’s the Cheapest Option
TV and internet ads claim to settle debts for a fraction of what’s owed. While it may seem like a good deal on the surface, if it’s too good to be true, it likely is. Debt settlement agencies charge up to 25% of the settlement amount, and the client has to report the saved settlement funds as income.
It Saves Money
There are multiple types of consolidation loans, and while one may help a client save, it takes research to find the right one. The options are: a consolidation loan from a credit union or a bank, a home equity loan, and an unsecured personal loan. These loans often come with high interest rates, which makes debt management a better option for some.
Debt is easy to get into and hard to get out of, but it doesn’t have to be a life sentence. With debt management and consolidation programs, borrowers can get the fresh start they need. Visit the website for more details or call today to request a consultation with a debt management expert.