If you’ve decided to use a debt consolidation loan to . . . well . . . consolidate your debt, you’ve hopefully done your research. If you’re still not totally sure what you’re about to get into, here are some myths that have been busted by the folks over at Nerdwallet…
It will reduce your debt: Keep in mind, consolidation and reduction aren’t synonyms. A debt consolidation merely puts all of your debt in one place, under one payment. If you’re wanting to reduce your debt without paying it all, you’re probably interested in debt settlement, but that’s process that can do a lot of damage to your credit, so think twice before you try to go that route.
It will help you save on interest: You may actually end up paying more when it’s all said and done (and take longer to pay it off) but a debt consolidation loan can provide more manageable payments which can help you get off the struggle bus in your daily life.
It will hurt your credit score: While your credit score will take a small hit at first, a debt consolidation loan will allow you to pay down your total debt and do it on time each month, and that should help your credit score recover fairly quickly.
It will be expensive: The interest rates on debt consolidation loans are lower on average than the rates on credit cards, so no matter how much interest you’ll have to pay, it’s definitely going to be lower than the interest you’re currently paying.