If you have multiple debts and you are trying to get off of them, then you have probably heard of the concept of debt consolidation.
Debt consolidation is the process of trying to control the level of credit that an individual has. There are many misconceptions about debt consolidations. There are so many things that every person thinks about this process even if a lot of people would want to experience it and would also need it for them to get out of debt.
If you are looking at debt consolidation and how you can use it for your own good, you could use it for your own advantage.
With that, the following are some of the most common misconceptions about the process and what it needs to happen.
The Common Misconceptions
The first thing that one should not believe is the myth that debt consolidation will negatively affect your credit score. Your credit score is the score that banks and financial institutions rely on deciding whether or not to allow you to obtain a loan from them or not.
One of the most common misbelieves that Singapore citizens have is that when you do debt consolidation, you damage your credit score because you end up having a lot of your debts in one debt since you can no longer handle it.
Why is this a common misconception? Most individuals think this way because the credit score may slip slightly down when they open new credit and close the old ones.
This one is a common thing that happens when one does the process – if you close an already existing debt and make way for a new one, you end up having to face your debt standing being slightly down. If you continue paying the loan on time and prove that you can already pay the loan and are in a better financial standing, your credit score would go up. The initial drop is a normal circumstance, and there is nothing to worry about that.
Another one that you should keep in mind is the fact that debt consolidation does not land you into more debt. People often say that when you try to consolidate your debt, you may end up getting more fire to quench your debt fire.
It is using your debt to cover the previous debt which you have to pay off, but you will fail to do so. When you are faced with a predicament like this, you should know that this is not the situation.
Debt consolidation does not add any more to your debt. There are so many debt management plans that determine whether you are capable of repaying a big loan or not. With the consolidation process, you create a mother loan to close off the other loans that you have. During this period, you need to be able to control your loan habits and your spending habits because if not, you will end up with a deeper debt crisis.
On top of that, debt consolidation does not save you money. Many people think that when they do debt consolidation, they save more money. This is not a fact.
Debt consolidation does not save you any money. It just makes sure that you do not spend any more money than what you can ordinarily pay off. It does not pay you any money, nor does it save you any money; it just prevents you from paying up a lot of interests.
Before you navigate through the process, you should give attention to the debt consolidation repayment fees, penalties, interests, and more.
Some people also have the belief that debt consolidation is not a genuine method. Some people think that it is just a scam to get people through small debts to make him pay the bigger debts.
Fortunately, this myth is not true. The process of debt consolidation is a legitimate avenue that a person can do to pay his debts. This one does not mean that there are no scammers at all, even in a big economy like Singapore, there still exists some scammers who may be after a person’s money. Before going through something so big and trying out the process, you can consult with a credit counseling agency that can help you can go a long way towards getting your debt in the right place.
You should also know that debt consolidation does not guarantee that you will be able to settle all of your debts. There is no one way that can get you to pay off all of your debts. You need to work through it, and you still need to pay all of your outstanding debt.
The point is simple: it is only the lender that changes, not the debt, but that means you still need to limit your expenses, self-control is still important.
Another thing that people often think about is the fact that a debt consolidation is a form of bankruptcy. Some people believe that when they go and venture with debt consolidation, they may end up being bankrupt.
That one is not true. In Singapore, when you are declared bankrupt, you destroy your financial standing, and it does not go away for ten years.
Contrary to the myth, debt consolidation removes you from bankruptcy and does not make you work towards it.
The Misconceptions Can Do Harm
One thing that every person needs to know is that believing in misconceptions would hurt them. If they believe in something that is not true. They may end up having problems that could have been prevented if they were paying the right amount of attention towards their debts. These misconceptions should be prevented, and every person should keep in mind that the best way to get away from their financial problems is to do research and to consult a financial expert.