The Truth of 3 Debt Relief Myths

Debtors are looking for debt relief solutions that are offered in a variety of ways to help them get rid of their overwhelming debt problem. They look for information & resources online and offline to get the best solution that fits their financial situation. However, there are debt relief myths that may mislead the debtors to a wrong direction. Let's explore the truth of common three myths about the debt relief options.

Myth #1: Credit counselors can help to cut your debt payment in half

This is just a fudging claim. A credit counselor won't be able to cut your debt payment into half, whatever you owe you need to pay it if you want to be debt free. For instance, if you miss two monthly payments, for example $200 per payment, at the third month, you will need to make $600 to bring your debt to current status in order to avoid further late charges. If you have a problem to repay this debt and approach a credit counseling service, what the counselor can help is re-age the bill, knocking your payment back to $200. In addition, some credit counselors are able to help in reducing interest rate or waive late charges after discussing and getting agreement from your creditors. But, what you have owed to your creditors you need to pay.

Myth #2: Debt consolidation can always save you money

You may have seen advertisements claiming on how much money you can save with their debt consolidation packages without out-of-pocket fees. Those deals look like benefiting the debtors, they help to consolidate all balances from multiple loans and credit card debts under a consolidation loan to save money and to ease the debt management, without a debt consolidation fee involved. The deals sound great, but the truth will fall victim to flipping. The so-called "zero fee" is in fact the fees have been hidden into the consolidation loan. Generally, these hidden fees are very costly may make you spent more in debt consolidation than before.

If you really want to benefit from debt consolidation and save some money with the solution, the simplest formula is to compare your existing minimum payments to what your payment will be under your selected debt consolidation package, including all fees involve, if the deal does not save you 5 to 10 percent, then it is a wrong choice.

Myth #3: Credit counseling and debt management programs are the same

Most often, credit counseling services always tight together with debt management programs, but they are not the same. The debtors may misunderstand credit counseling to be the same as debt management program is because most credit counseling services will propose a debt management plan to their clients so that their clients can follow a predefined path in working their way of debt. But, enrolling into a debt management plan is an optional.

Basically, credit counseling involves the education portion that helps debtors to develop a budget plan that takes into the consideration of debt repayment so they will allocate money to clear their debt loads every month. Whereas, the debt management plan is a tool proposed by a credit counselor to take a monthly lump-sum from your income and distribute to your creditors on your behalf until you clear them off.

Summary

The above debt relief myths are among the common three that cause misunderstanding among the debtors who are looking for solutions to get rid of debt. Debtors who get themselves understand the truth of these myths so that they can choose a right debt relief solution to help in handling their debt problem.

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