Debt can impact your finances, especially if you several ones under your name. That's why when it comes to managing debts, most people choose to consolidate with a personal loan to tackle it. Debt consolidation loan helps simplify your debts by putting them all in one account.
It includes how much its costs as well as how long it'll take for you to pay it. But there are still a few people who hold a few misconceptions about it and how it works. So, to help get a better understanding of it, here are a few common myths regarding debt consolidation and the truth behind each of them.
Myth 1: Debt consolidation diminishes your debt
Debt consolidation doesn't reduce or forgive your debt. Instead, it rolls all your debt into a single loan so that it'll be easier for you to make monthly payments. If you want to reduce the amount that you owe, hiring a debt settlement company is the best way to go.
Myth 2: You'll save on interest rates all the time
It's only applicable for those with a high credit score. If your credit history is high, there's a chance that you'll receive a lower interest rate on debt consolidation compared to your existing debt. However, there's still a chance that your total interest cost will increase if you choose to extend the repayment term.
Myth 3: It can negatively affect your credit score
Debt consolidation loans require people to have a hard credit pull once you apply. But it would only take a few points from your credit score, which shouldn't cause you any significant harm. Also, there's a chance that your credit score will improve once you're able to pay all your debts regularly.
Myth 4: Debt consolidation is expensive
The interest rates when it comes to debt consolidation loans can vary by lender. But experts say that it's often lower than what you usually get on credit cards. The starting interest rate starts at 6% for borrowers with a credit score of 720 to 850.
That's why it's best to work with a licensed money lender here in Singapore to know if you're eligible or not. Also, most debt consolidation loans don't have any additional fees other than the interest rates. Although other loans have a one-time origination fee and a late fee in case you make any late payments.
Myth 5: Debt consolidation loan application consumes a lot of time
Most lenders nowadays provide applicants with the option to apply online. All that you need to do is to go to their website and fill out the online loan application process. You also need to submit the documents required to secure the loan.
These are only a few of the misconceptions that you need to learn about debt consolidation. The process to apply for it is easy. All you need to do is prepare the necessary documents beforehand and fill out the loan application form found on their website.