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HomeBlog Debt Consolidation4 Myths You Should Know About Debt Consolidation
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4 Myths You Should Know About Debt Consolidation

July 17, 2013 by National Debt Relief

What To Do During Your Pre-Retirement YearsPeople who find themselves overwhelmed by their debts generally want one thing and one thing only – to get rid of them. Problems with debt can literally take over your life. They can cause you to miss sleep, develop stomach problems or even end up divorced.

7 ways to manage debt

Admitting you can’t manage your debts is the first step in getting them under control. A second important step is to choose a way to manage them. There are a number of options available for debt management, including.

• Debt consolidation loan
• Credit counseling
• Debt Settlement
• Bankruptcy
• Balance Transfer
• Earning more money
• Living frugally

Why debt consolidation is the most popular

Debt consolidation is by far the most popular way to get debt under control because there are three ways to do it – a debt consolidation loan, debt settlement and credit counseling. However, for most people, debt consolidation means borrowing money to pay off their debts. But before you rush out to get a debt consolidation loan, it’s important to know these four myths.

Myth #1: Debt consolidation is the same as debt settlement

Many people believe that debt consolidation equals debt settlement. However, they are two different solutions. As noted above, debt consolidation typically means borrowing money at a low interest rate and using it to pay off debts. On the other the hand, debt settlement means paying back creditors for less than you owe. Another important difference is that a using a debt consolidation loan to pay off debts won’t have an adverse effect on your credit score while debt settlement will.

Myth #2: Debt consolidation will save you money

How To Convince The Whole Family To Save Debt consolidation will likely save you money in terms of your monthly payment but not in the amount of debt you owe. The reason for this is that none of your bills will be forgiven. If you owed a total of $25,000 and borrowed enough money to pay if off, you’d still owe $25,000. You would likely have a lower monthly payment because you’d have a better interest rate. But you’d probably pay more interest over the life of the loan because it would have a longer term – or more years to pay back the money. For example, you might have credit card debt you could pay back in three years if you really worked at it. In comparison, if you were to get a homeowner’s equity line of credit to pay off those debts, its term or the amount of time you’d have to pay back the money could be five or even seven years.

Myth #3: Debt consolidation is always a better option than filing for bankruptcy

Many experts say that it’s always better to do debt consolidation than to file for bankruptcy. But this is also a myth. If you need to borrow a really huge amount of money, you should first sit down and determine whether or not you will be able to handle the monthly payments the loan will require. If you don’t feel you will be able to do this then bankruptcy might be a better option. A chapter 7 bankruptcy, which is by far the most popular, can get all or most of your unsecured debts discharged. A bankruptcy will stay on your credit report for either seven or 10 years (depending on the credit bureau) and will probably drop your credit score by as many as 200 points. But if you’re totally submerged in debt, a bankruptcy would give you a “fresh start” and might be worth the damage it would cause to your credit.

Myth #4: Debt consolidation will delay getting out of debt This actually may or may not be a myth depending on several factors. As we wrote in an earlier paragraph, if you were to get a homeowner’s equity line of credit or refinance your mortgage to pay off your debts, this would assuredly delay getting out of debt. However, if you were to get another type of loan such as a personal loan with a low interest rate, you might be able to use the money this saves you to heavy up on your payments and get out of debt in less than five years.

Do the math

The important thing is to do the math before you decide to consolidate your debts with a loan. This will make sense only if you would have a lower interest rate, a lower monthly payment and if the loan would cost you less in total than if you were to just buckle down and pay off your debts You need to keep in mind the old maxim that you can’t borrow you way out of debt, which is what a debt consolidation loan amounts to. There are better alternatives available such as debt settlement, credit counseling or finding ways to increase your income that could help you become debt free and without having to borrow more money that you would just have to be pay back. For example, here’s a short video about using debt settlement to eliminate credit card debts.

Do you qualify for debt consolidation?

National Debt Relief
National Debt Relief

National Debt Relief is one of the largest and best-rated debt settlement companies in the country. In addition to providing excellent, 5-star services to our clients, we also focus on educating consumers across America on how to best manage their money. Our posts cover topics around personal finance, saving tips, and much more. We’ve served thousands of clients, settled over $1 billion in consumer debt, and our services have been featured on sites like NerdWallet, Mashable, HuffPost, and Glamour.

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Moderate National Debt Relief Caller: Misty Transcribed WE 3/28/2021 Misty: The call, it may be recorded. Can you tell me do you recall how you heard about NDR? KYLE: I googled it, and then it went to Better Business Bureau or whatever it's called. And you guys have the highest rating. Misty: Which service did they actually provide for you? KYLE: So, basically, I enrolled all my credit cards into the program. And I stopped paying. And then, the lawyers reached out to the company's lawyers. And they've been settling, stuff like that. Misty: How would you describe your interaction that you had with your representative that you worked with on getting everything squared away? KYLE: Oh, it was excellent. Misty: Do you feel that the door of communication is still open if you have any questions or concerns? KYLE: Yes. Yes, I actually have been meaning to call you guys, too. [Laughs] I just haven't had time, but yeah. Misty: How did NDR work with you on your payment plan? Do you feel that they're flexible if you need to change the date? KYLE: Yeah. Yeah, if I ever had to. I don't need to, but I know that if I ever had to, I can just call them. Misty: What are your thoughts on the cost in relation to the quality of service you've received from them? KYLE: I'd say 10 out of 10. Misty: How has working with NDR impacted your life so far? KYLE: It's helped out a lot. I was really underwater with bills, and now I can breathe. And I managed it a whole lot better. Misty: Have you actually finished the program or are you still working through it? KYLE: Still working through it. I got one more card to settle. Misty: But we're making progress though, right? KYLE: Absolutely. Yeah, I think one of my cards was 17,000. They settled it for 6,000. That was pretty cool. Misty: Are there any other comments or even any suggestions on how they might improve their service for you? KYLE: Well, what I was gonna call them about was just as far as the payments that I make, and is there an actual date as to when it stops at 43 months, or if that was an estimated date? So, I guess I should have gotten more clarification in the beginning. But that's kind of what I had questions about. Misty: Well, that brings us to the star rating, which is 1 to 5. So, how would you rate your experience with NDR at this time, and 1 would be very dissatisfied, 5 is that you would recommend them to a friend at this time? KYLE: A 5. Misty: What would you say to that friend who asked you about it, just maybe one or two things you might tell them before they decide who they're going with? KYLE: That your credit is gonna take a hit, but it's gonna bounce back, and you'd be fine. Misty: Would it be okay if we shared your feedback on ConsumerAffairs.com for others to read it or in a similar point in their life where they're like, “I'm not sure who I need to go with,” but they can read reviews of people that have started the process with NDR? KYLE: Yeah. Is it gonna have my first and last name on the review? Misty: No, sir. Only first name, and we do not publish any contact information. KYLE: Okay. Yeah, that’s fine. Misty: I have kylecunningham1873@gmail.com. KYLE: Yes, ma'am.

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Kyle Cunningham
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