Why The Truth About Debt Consolidation Hurts
Credit 9, Simple Path Financial, and Americor Funding have been flooding the market with unrealistic, low-rate debt consolidation offers. Even if your credit score is below 550, if you are on their mailing list, you will get a reservation code and a pre-approved offer for credit with interest rates as low as 4.99%.
Debt consolidation is when taking all your unsecured loans, credit cards, and medical bills and combining them into one supposed “low monthly payment.” The truth about debt consolidation is that when you peel the layers and get to the bottom of it all, you may find out it’s not all it’s cracked up to be. Some say you are better off ignoring the advertisements for debt consolidation and creating your own plan that will save you a lot more in the long run.
With debt consolidation, there is no guarantee that you will get lower interest rates. That’s up to the discretion of the creditor or lender. It also depends on various factors such as payment history and credit score. Even if you qualify for a loan with low interest, there is no guarantee that the rate will stay low.
If you’re reading this, then you are looking to see if complaints about Credit 9 are growing. Whether it is credit cards, mortgage payments, student loans, or auto loans – the list just goes on. Those minimum payments probably aren’t helping you with debt either. At this rate, you see yourself getting stuck in a financial crisis with no way out.
You don’t want to file bankruptcy, you want to increase your credit score, so you find what you think is the next best alternative: debt consolidation. Because in your head, you think it will be stress-free and much simpler to handle one easy payment and the promise of lower interest rates. But that’s not the truth about debt consolidation.
The debt you have is bad news, the truth is that debt consolidation loans don’t fare any better. If anything, they make your financial situation much worse. They do little to confront your mountain of debt. What’s worse is that you end up paying more interest for a longer time because of the promise of debt consolidation.
Luckily, there are various debt forgiveness programs available that you can look into. From the IRS Debt Forgiveness Program to the Obama Student Loan Forgiveness Program, you can find a suitable option that will help you eliminate your debt and save money. However, you must do your due diligence and research these programs to make sure you are getting the best deal for you. Don’t just give in to the debt consolidation hype and end up paying more than you have too.
Here is the truth about debt consolidation:
- Debt consolidation is the same loan with longer repayment terms
- The longer you’re in debt, the more you will have to pay
- The lower interest rate may not always be so low
There is a major difference between debt consolidation and debt settlement and it is important that you gain a clear understanding.
Low-Interest Rates on Debt Consolidation Loans Will Change
This rule has been commonly observed in debt consolidation loans by transferring credit card loans. Companies usually advertise low-interest rates with ‘special promos’ that are applicable for a certain period. Does this ring any bells? The only problem is that the rate will usually go up with time, catching you by surprise.
It is very important to stay on your toes when it comes to those ‘especially’ low-interest-rate deals during holidays. Most of these companies specifically target shoppers who don’t have a budget and tend to splurge on things they don’t need.
Many companies will try to lure you in with lower interest rates and then increase them over time. Now you’ve got more debt than you started with.
Being in Debt for Longer Is A Bad Idea
It doesn’t take a genius to understand that if you extend your payments and lower your interest rate, you will have a lower monthly payment. Your primary objective is to get rid of your debt as soon as possible, not to restructure it over a longer time frame!
Debt Consolidation Does Not Eliminate Debt
Remember, you are only consolidating your debt and spreading it out over several long grueling years. In most cases, when someone consolidates their debt, they eventually end up in more debt. The reason for this is bad money habits which prevent them from building wealth and staying out of debt. Their spending patterns don’t change, which makes it extremely like they will go back into the same problem.
Debt Settlement Works But You Need to Follow Through
There is a world of difference between debt settlement and debt consolidation, although both terms may sound the same to the layman.
Debt settlement is vastly different. It’s when you recruit a third-party company to negotiate on your behalf with your creditors for lower rates than what you owe. Debt settlement companies may charge a fee that could be a certain percentage of your total debt, which is usually in the range of 15 to 25%.
The Truth About Debt Consolidation Is That You Need to Make It Happen
Debt consolidation or debt settlement will not address the core issues of your financial problems. You will probably never tackle the main reason why you got there in the first place. You shouldn’t restructure your loans: you should pay them as soon as you possibly can. To do that, you have to change your understanding of debt. Even though your lifestyle choices got you neck-deep into debt, you can still maneuver out of this by finally making the right lifestyle choices.
There never is a quick solution when it comes to debt. And it certainly isn’t in the form of better interest rates or another loan. What you need is to take direct control of your money and make a plan. The result is that you’ll finally become debt-free!