If a person is considering getting Debt Consolidation Brisbane, they may have preconceived notions as to what the process is and what it can do. For a consolidation effort to be successful, the borrower needs to learn the truth. The article below will attempt to refute some misconceptions about debt consolidation.
Consolidation and Settlement are the Same Thing
Settlement and consolidation are two different things. While consolidation combines all debt into one low-interest loan, settlement involves paying back less than the amount owed. Because some debt is forgiven in settlement, these arrangements result in negative marks on a person's credit report. However, debt consolidation does not harm a person's credit score.
It Saves Money
Consolidation does not help borrowers save because debts aren't forgiven. However, a person can save indirectly if the loan comes with a lower rate and they're no longer forced to pay late fees and penalties. When a person isn't paying hundreds of dollars in late fees and additional interest, they can save whether or not they decide to consolidate.
Consolidation is Always a Better Choice Than Bankruptcy
While many people can consolidate their debts, bankruptcy is a great choice for those in desperate financial situations. Consumers should be wary of companies offering to consolidate debt without also offering bankruptcy as an option.
It Makes it Take Longer to Get out of Debt
Consolidating many debts into one large monthly payment may leave some people thinking that payoff will take longer than if smaller payments were made, but that often isn't the case. Because of interest rate reductions, the opposite can be true. Borrowers who opt to consolidate consolidating loans may end up paying debt off faster than if they'd continued to pay on several loans.
Most Consolidation Efforts are Scams
There are numerous loan consolidation scams out there, and not all plans can help people save money. However, there are numerous reliable companies that can help borrowers ease financial strain while freeing up money for living expenses. When a person chooses a quality loan from a good lender, they can see enormous financial benefits. However, falling for a debt consolidation scam can have lasting consequences and customers should choose wisely.
Debt consolidation can help debtors get in control of their finances once and for all. As a person's financial situation begins to stabilize, being informed about debt reduction can help them make the right decision for their needs and their circumstances.