Debt Consolidation – The Traps. The Myths. All Busted Here For You – Part II
This article is the concluding part of the one written earlier under the same title & the introduction.
Debt – a four letter word is capable to out throw the peace and happiness of one’s life. Finding the exact reason could be like searching a needle in a pile of husk. Surprisingly, every one of us, either active, busy, disabled or popular, accrue debts in variety of forms and variety of sources throughout the life.
But why do people fall in such circumstances, how do they get into such credit traps and why they believe in certain myths when it comes to debt consolidation? The answers could be specific to specific individual, however, the generic ones are discussed here in this article ‘Debt Consolidation – The Traps. The Myths. All Busted Here For You.’
As discussed in earlier part of the article about avoiding the debt consolidation traps, here, we will be busting the myths prevailing with debt consolidation among people.
Myth #1: People who know well how to manage money does not need debt consolidation
That’s a common misconception, however, debt consolidation is practiced by the affluent and even popular people in business most of the time. This way it helps to restructure existing debts by combining entire balance into a single, manageable personal loan that would just need fixed regular repayments. Just because interest rate is generally fixed, it makes budgeting easier and expenses predictable. Moreover, making only one repayment a month, one is less likely to go default on a loan.
Myth #2: Going for a consolidated loan will be cheaper as compared to others.
Not necessary because it mostly depends on the credit history of the individual as well as the lender’s perspective of the applicant’s credibility. Affected with a bad credit rating usually results in not getting a better deal. However, there are experts that provide necessary help to fix bad credit ratings in Australia and even can find an affordable bad credit loan. Moreover, one may also require to repay the new loan for a longer period that could be much higher overall. To avoid such loss, paying off more than the minimum every month is highly preferred.
Myth #3: Debt consolidation will solve all your problems.
Ok, now know this very well – debt consolidation will not lower the debt – it will just reorganise it. Additionally, debt consolidation is not going to tackle the issue of accumulating a debt. As an individual, you need to change your overspending behaviour that has put you into debt as well as follow the discipline of debt consolidation with more responsibility.
Myth #4: Your credit rating is compromised if you go for debt consolidation
If handled carefully, debt consolidation will not make a negative impact on credit report. Rather, it may even improve it. After the amendments in comprehensive credit reporting introduced in 2014, instead of just focusing on negatives or defaults, credit providers will also look at the positives like the loan repayments.