Debt consolidation means consolidating all your debt into one. It is one way to tackle your debt. But then there are misconceptions about using a personal loan for debt consolidation. In this article, we will cover 5 top myths about a debt consolidation loan with what is real.
Myth 1: You can reduce your debt using a debt consolidation loan
Reality: Paying off all your debts like credit cards or loans with a loan does not reduce your debt. It means multiple debts roll into one loan and you make the repayments against that balance.
Hiring a debt settlement company may help you with debt elimination/reduction. That may sound tempting, but it (a) is very costly, (b) can negatively impact your credit report so approach cautiously.
Myth 2: You will pay less interest
Reality: If your credit score is good, you may get a loan with interest rate lower than what you are already paying for your existing debts. However, your total rate of interest can increase if you spread or extend your repayment term for a little longer. Though the monthly payments and new interest rate are lower, it may help in improving your cash flow. Remember that the longer the term, the more interest you will pay.
Myth 3: Your credit score will be damaged
Reality: Personal loan for debt consolidation does require a hard search on your credit score, basis that, lenders offer you the final quote. But this usually ticks off fewer points from your score. Your credit score may improve if you pay all your debts on time. Paying debt off on time makes up 35% of your FICO score.
Myth 4: Debt consolidation is expensive
Reality: The interest rates on these loans vary lender to lender but are usually lower than average interest rates on credit cards. Though your credit score plays an important role when you apply for such loans. With a good credit score, you may able to get a lower rate on the loan. However, if you have a not so good credit score, you may get the loan with a higher interest rate.
Myth 5: The whole process is time-consuming
Reality: You can easily apply for debt consolidation online. Most lenders/brokers have their websites, and you can fill a simple online application on their website. The decision will be instant, unlike traditional loans. You don’t have to wait much for the final decision on your application or to know whether you are likely to get the funds or not. Right from filling up the application to uploading documents through a secure portal online provided by the lender, the whole process is online.
How Can Loan Broker in the UK Help?
Loan Broker in the UK specialises in providing deals on personal loans. We have a panel of Britain’s reputed lenders, and they may help you with your requirement. Visit Loan-broker.uk and fill up an online application. You won’t even have to wait for the decision on your application. The decision will be real-time and instant. To apply for a personal loan for debt consolidation with Loan Broker, click here.