PHOENIX–(BUSINESS WIRE)–As Americans’ credit card debt levels rise, 29% of them are facing problems with their liabilities, according to New York Life. This means that millions of people may need solutions such as debt consolidation, but may find information about the process confusing or misleading.
“Debt consolidation offers a way to combine multiple debts into one payment to provide a streamlined way to repay. It’s often a great solution for people overwhelmed by multiple bills looking to regain control of their money,” said Michael Sullivan, personal financial consultant at Take Charge America, a nonprofit credit and housing counseling agency. “But like other forms of debt relief, it can be difficult to separate the truth from the truth. fiction.”
Sullivan busts five common debt consolidation myths:
- You cannot pursue the consolidation yourself. False. Despite what you may hear elsewhere, debt consolidation is a process that you can initiate yourself. Consolidation can take many forms, including a debt management plan, balance transfer credit cards, and personal loans. Research the different solutions to determine which works best for you. A nonprofit credit counseling session can also offer an unbiased assessment of your unique situation.
- Consolidation eliminates your debt. False. Although consolidation is a great way to control your debt by combining multiple debts into one payment, you still have to pay off the balance. Consolidation is not forgiveness.
- You must have good credit to pursue debt consolidation. Mostly wrong. When applying for a consolidation loan, good credit can help you get better terms and a lower interest rate. If you are exploring a debt management plan, your credit score is not a factor in qualifying for the plan or getting lower interest rates.
- You always save on interest. False. You can save on interest, depending on the terms of your consolidation loan. But even with a lower interest rate, you might end up paying more interest over the life of the loan if you extend the repayment period.
- Consolidation traps you in a cycle of debt. False. Like other debt relief options, consolidation is a tool to help you regain control of your financial situation. It doesn’t solve the underlying problem, which is often overspending and mismanagement of money. If you don’t solve these problems yourself, you can easily get into debt.
To learn more about debt consolidation or other debt relief options, visit Take Charge America.
About Take Charge America, Inc.
Founded in 1987, Take Charge America, Inc. is a non-profit agency providing financial education and counseling services, including credit counseling, debt management, student loan counseling, housing advice and bankruptcy advice. He has helped over 2 million consumers nationwide manage their personal finances and debts. To learn more, visit takechargeamerica.org or call (888) 822-9193.