Most of us fall into debt due to various reasons and debt consolidation comes up as the most viable solution in this regard. However, there are various myths regarding debt consolidation. But the truth is something else. Let's take a look at the myths and truths regarding debt consolidation.
Myths#1: Credit counselors will reduce monthly payments into half.
Truth: In most cases this is not true. This holds true only in very few circumstances. DMP personnel will re-age that bill. The missing money (late payments) will be merely tacked back onto the total owed.
Myth#2: Debt consolidation hurts credit score.
Truth: This is not true. Debt consolidation won't have a negative impact on your credit score or credit report. The truth is that debt consolidation may even improve your credit score as you'll be paying your loans. If you pay off your bills in full it will help improve your credit score.
Myth#3: For debt consolidation, you need to take help of an attorney or debt relief company.
Truth: There are debt relief companies who can help you in negotiating with your creditors and consolidating the loans. However, it is not mandatory to take help from such organizations. You can also negotiate with your creditors/collection agencies and consolidate debts on your own.
Myth#4: You need to be a homeowner in order to get debt consolidation.
Truth: It is not mandatory to own a home if you want to consolidate your debts. Owning a home is definitely an advantage for those who want to consolidate their debts. The borrower can take advantage of the home equity, if any, and go for cash out refinance. The borrower can use the cash out money to pay off the debts. However, those who don't own a home can even consolidate their debts.
Myth#5: It will be difficult to get future loans if a person goes for debt consolidation.
Truth: This is incorrect. If you negotiate the debts on your own, most probably you won't leave back a paper trail. However, if you take help of a debt relief company that might leave a paper trail and your future creditors may know about it. It will only highlight the fact that you were interested in paying off the debt. This will make you a responsible debtor and your future creditors will be ready to give you loans.