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Debt consolidation has become a popular means of debt management, but not everyone is fully informed about the truth behind consolidation. This article will cover some of the most common questions about debt consolidation, debunking some of the many myths that advertisements and other sources of false information perpetuate.

 

Will debt consolidation erase my debt

Many think that debt consolidation erases existing debt, but this is false. In truth, debt consolidation takes your existing debt and places it under a single plan. You still have to pay off your debt, but you will get a lower interest rate, lower monthly costs, and a longer payment period.

Will debt consolidation be cheaper than my existing debt

Although you do get lower interest rates and monthly fees, the truth is that you may end up paying a higher cumulative cost with debt consolidation. Because the payment plan is stretched out, the low interest and low monthly expenses add up to greater expenses than paying off your existing debt as is. The advantage is a more manageable payment plan.

Is debt consolidation better than bankruptcy

The best answer is that it depends. If you debt is way too high and you don't have a stable source of income, then bankruptcy will be much better than consolidation. On the other hand, if you don't have a large amount of outstanding debt and you are still making stable income, then debt consolidation may be viable.

Will debt consolidation negatively affect my credit report

Yes, it is true that debt consolidation will have a negative effect on your credit report and credit score. Still, taking this negative hit to your credit may be well worth it if you are able to successfully follow through with your debt consolidation plan and pay it off in full over your payment term.

Will debt consolidation solve my problems

No, debt consolidation in itself will not solve your financial problems. It will take dedication and discipline on your part to pay off your debts and solve your financial problems. Dedicate yourself to making regular payments on time and have the discipline to avoid creating more debt. Also, make sure that you carefully manage your finances to ensure that you don't take "one step forward and two steps back," so to speak.