When we owe a lot of money, we often lose our peace of mind and sleep, as we are constantly worried about paying back the money that we have borrowed. When the borrowed amount is small and it is borrowed from friends or family, we have the opportunity of paying them back at our own discretion, but when the money has been borrowed from financial institutions like banks, we do not have the advantage of paying back at our convenience.
When we borrow money from the banks in the form of loans and credit cards, we need to pay the money back in a given period of time and if we don’t our debt amount increases. Thus, people always try to find ways through which they can get relief from debt. There are lot of misconceptions and myths associated with debt relief. Here we will try to bust 3 of the common myths about debt relief.
Myth no 1 – Only home owners can get a consolidation loan
Many people believe that in order to qualify for consolidation loans, they need to be home owners or else they will not qualify for these loans. However, this is not true since most of the lenders offer loans for consolidation of debt and since these loans are unsecured the applicants do not need to pledge their home or any other financial asset as collateral. These institutes will help you in clearing your debts, even if you do not own a house, as long as you meet the rest of the criteria to be eligible for these loans. One such criteria is that the total debt amount should not be less than $10,000.
Myth no 2 – Debt settlement does not reduce interest rates
This is another widespread believe, which is not true. People think that debt settlements will not help them in lowering the total debt amount, but will only provide them with a certain amount of relief in the interest rates charged. However, the fact is that such settlement agreements can actually assist people in not only reducing interest rates but also in reducing the total debt amount. Also, such services will provide the people with an opportunity to make single payments every month, rather than multiple payments to different lenders, like credit card companies, mortgage companies etc.
Myth no 3 – The impact on the credit rating is there to stay (permanent)
People have a misconception that once their credit rating has been affected due to bad debt, there is nothing they can do to improve it. This is the reason why many people do not even make an attempt to avoid bankruptcy as they think that avoiding it will be of no help. However, the truth is that through consolidation of debt people can not only get debt relief, but they can also improve their credit ratings in the long run. The impact is not permanent and any impact caused by the settlement agreements will also get corrected once people try to make payments and pay off their debts.
These are few of the common myths related to getting relief from debt. People should try their best to avoid bankruptcy and clear all their debts in order to attain complete financial independence.