Lenders do more than offer borrowers debt consolidation loans. They advise the borrowers on the proper ways to use the loan to clear debt and regain financial freedom.
With the New Year kicking in, a majority of the people are creating new year resolutions about the things they want to achieve in the new year. These resolutions vary from health goals, financial goals, and family goals, among many others. One of the common financial goals among many people is clearing debt.
Individuals looking to get out of debt explore many different options to do this. One of the ways to get out of debt is to get a debt consolidation loan from a lender in Singapore.
If you are considering getting a debt consolidation, it is important to get the truth about these loans before you commit. Here are a few myths that you are likely to come across when shopping for this loan:
Debt Consolidation Affects One’s Credit Score
The credit score of an individual depends on two things: credit utilization and payment history. Credit utilization refers to the ratio of one’s available credit versus the amount that one owes a lender. When getting a loan your credit score may drop a bit due to closure of an existing account or the opening of new credit. However, as one makes timely payments and reduces the debt that they owe, the credit score improves drastically.
You Will Get Into More Debt
This is probably the myth that you will hear the most. You will be told that consolidating your debt does not help you reduce your debt and that it, in turn, increases your debt. Thus, some will convince you that this method does not solve the debt problem. What many people do not know is that individuals getting debt consolidation loans undergo credit counselling. The purpose of the counselling is to target the root of the debt problem. That way, one will not fall back into debt once they repay their loan.
You Will Save Money
Debt consolidation loans are available in different terms and will vary with your lender. Each type of consolidation loan varies depending on your requirements. The main intention of this type of loan is to help individuals clear their debts and not save money. Therefore, consider discussing with your lender about the different options at your disposal.
It Is A Scam
People who are in debt are often desperate to get out of this condition. As a result, many lenders are popping up by the day who claim to help people get out of debt. Unfortunately, not all lenders are genuine and hence the belief that debt consolidation is a scam. The truth though is that debt consolidation is a legal method to clear debts. You should get a licensed lender to avoid falling prey to the scammers in the lending industry.
Debt can hold you from doing more things financially, especially if the debt keeps increasing. Most people fear to get a debt consolidation loan in Singapore because they believe it would affect their credit score. However, you should not be in the market for a credit line when in debt. Your focus should be on the credit score you get finally. Therefore, get a loan and work on getting debt-free and improving your credit score.