Most people facing growing debt and limited resources have probably looked around for financial solutions and heard a small bit about debt consolidation. Debt consolidation is a fantastic financial option to overcome overwhelming debt, but it is not right for everyone. But before you can figure out if it is right for you, you have to realize that some of what you may have thought about debt consolidation … is incorrect.

Of all the financial plans available for people dealing with overwhelming debt, debt consolidation is probably the most valuable and the least understood. In fact, you may already believe some of these common myths about debt consolidation. Find out the truth!

Myth #1 Debt consolidation is the same or similar to debt management, debt settlement, and bankruptcy.

Truth Debt consolidation is nothing like those other programs. In truth, it is not so much a “program” (you can even do it on your own, if you know enough) but more of a strategic approach.

In debt consolidation, you lump all of your debts together and repackage them. Debt settlement and debt management typically involve dealing with a company or counselor and the object is to reduce the amount you owe. Bankruptcy is a legal proceeding that involves a date with a judge.

Myth #2 Debt consolidation reduces your debt.

Truth No, it doesn’t. If you owe a total of ,000 on several credit cards and loans and you consolidate that debt, you still owe ,000.

Debt consolidation does not re-negotiate, settle, write off, or reduce any of your debt. What possible advantage is re-organizing your debt like that?

If you have a lot of loans at high interest rates, repackaging those higher-interest debts into one larger loan at a lower rate reduces your interest and the amount you have to pay. This means you can either pay less a month or (even better) pay the same amount but get the debt paid off sooner.

Myth #3 Debt consolidation will hurt my credit score.

Truth Done properly, debt consolidation will not impact your credit score or credit report negatively. In fact, debt consolidation may even improve your credit score! That’s because you’ll be paying off a bunch of smaller loans and any time a loan is paid in full, that helps your credit score.

Myth #4 Debt consolidation requires getting help from an outside agency or a lawyer.

Truth While there are companies that specialize in debt consolidation programs, you do not have to use them to consolidate your debt.

Of course, if you want to consolidate your debt on your own, you have to know a bit about how to do it and what the options are. But it can certainly be a do-it-yourself project for people excellent with money (or who are willing to learn enough to get excellent with money).

Debt consolidation is also not necessarily visible to outsiders. Your bank, the credit bureau, and other parties may not even be aware that you have consolidated debt.

Myth #5 Debt consolidation is something for financial losers and lightweights, not for people who know how to manage money.

Truth This is the most far-out myth about debt consolidation. Debt consolidation is a principle that is used in business and by the super-wealthy all of the time. It is a way of organizing and structuring your debts in a way that is most advantageous to you.

Myth #6 Debt consolidation is just robbing Peter to pay Paul; you’re just getting more debt!

Truth Debt consolidation is indeed a way for you to pay off one debt by getting another debt. But not all debts are equal.

As an example, let’s say that you owe ,000 and the loan is set up so that you have to pay 22% interest. For example, let’s suppose that I go to my credit union and work out a deal to borrow ,000 at 12% interest. While both debts are still in the amount of ,000, the debt at 12% interest is a better deal for me. I won’t have to pay as much per month or, if I make the largest payments I can, I can pay it off sooner.

Myth #7 Debt consolidation requires you to be a homeowner.

Truth There is a grain of truth to this, in that owning a home certainly offers an advantage to anyone who wants to consolidate debt. (It doesn’t matter if your home is paid for or not, but you do need some home equity.) But, you can consolidate debt without owning a home, too.

Myth #8 Debt consolidation will make it harder for me to get future loans.

Truth In most cases, it is unlikely that anyone but a forensic accountant could figure out that you consolidated your debt (unless you go through a debt consolidation companythat might leave a paper trail).

If you borrow money in one loan and then take out another, more advantageous loan to pay off the first one, you’re more likely to leave a paper trail of somebody who pays off debt responsibly. It is more likely to make you a desirable creditor.

Myth #9 People who consolidate debt just wind up digging themselves in deeper in debt!

Truth It is absolutely possible to consolidate your debt and then keep spending and get yourself in a huge mess. That’s why you need excellent information and a plot to pay off your existing debt, manage your finances now, and start plotting for your financial future.

There is no reason that debt consolidation cannot work to get you out of debt for excellent, but you have to have a plot.

Myth #10 Debt consolidation will allow me to write off some of my debts and it will stop bill collectors from calling.

Truth Let’s take these one at a time.

Unlike bankruptcy, debt consolidation will not allow you to write off any of your debtnot a penny of it. Whatever you owed as a debt before debt consolidation is the amount you’ll owe after debt consolidation.

The advantage is just that you structure it in a more favorable loan. You do not get existing debts cancelled or decreased! Now it’s right you can work that out in other debt management solutions (debt settlement lets you reduce debt, bankruptcy will let you write some debt off) but they come at a very high price. Both of these approaches will have a negative impact on your credit score, will make it hard for you to get future loans, and stay on your record for quite a while. Bankruptcy, in particular, is an extreme solution that involves an actual court proceeding and a judge who has the authority to make certain decisions about your financial situation (including forcing you to sell some items to pay off debts).

Debt consolidation can only stop bill collectors indirectly. Here’s how: let’s say you have six debts and you’re getting calls all of the time. If you consolidate your six debts into one large debt consolidation loan at more favorable terms, you’ll pay off all of those debts. Bye-bye, bill collectors!

But, if you don’t pay off your new debt consolidaiton loan on time, the bill collectors will start calling again.

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Most people facing growing debt and limited resources have probably looked around for financial solutions and heard a small bit about debt consolidation. Debt consolidation is a fantastic financial option to overcome overwhelming debt, but it is not right for everyone. But before you can figure out if it is right for you, you have to realize that some of what you may have thought about debt consolidation … is incorrect.

Of all the financial plans available for people dealing with overwhelming debt, debt consolidation is probably the most valuable and the least understood. In fact, you may already believe some of these common myths about debt consolidation. Find out the truth!

Myth #1 Debt consolidation is the same or similar to debt management, debt settlement, and bankruptcy.

Truth Debt consolidation is nothing like those other programs. In truth, it is not so much a “program” (you can even do it on your own, if you know enough) but more of a strategic approach.

In debt consolidation, you lump all of your debts together and repackage them. Debt settlement and debt management typically involve dealing with a company or counselor and the object is to reduce the amount you owe. Bankruptcy is a legal proceeding that involves a date with a judge.

Myth #2 Debt consolidation reduces your debt.

Truth No, it doesn’t. If you owe a total of $80,000 on several credit cards and loans and you consolidate that debt, you still owe $80,000.

Debt consolidation does not re-negotiate, settle, write off, or reduce any of your debt. What possible advantage is re-organizing your debt like that?

If you have a lot of loans at high interest rates, repackaging those higher-interest debts into one larger loan at a lower rate reduces your interest and the amount you have to pay. This means you can either pay less a month or (even better) pay the same amount but get the debt paid off sooner.

Myth #3 Debt consolidation will hurt my credit score.

Truth Done properly, debt consolidation will not impact your credit score or credit report negatively. In fact, debt consolidation may even improve your credit score! That’s because you’ll be paying off a bunch of smaller loans and any time a loan is paid in full, that helps your credit score.

Myth #4 Debt consolidation requires getting help from an outside agency or a lawyer.

Truth While there are companies that specialize in debt consolidation programs, you do not have to use them to consolidate your debt.

Of course, if you want to consolidate your debt on your own, you have to know a bit about how to do it and what the options are. But it can certainly be a do-it-yourself project for people excellent with money (or who are willing to learn enough to get excellent with money).

Debt consolidation is also not necessarily visible to outsiders. Your bank, the credit bureau, and other parties may not even be aware that you have consolidated debt.

Myth #5 Debt consolidation is something for financial losers and lightweights, not for people who know how to manage money.

Truth This is the most far-out myth about debt consolidation. Debt consolidation is a principle that is used in business and by the super-wealthy all of the time. It is a way of organizing and structuring your debts in a way that is most advantageous to you.

Myth #6 Debt consolidation is just robbing Peter to pay Paul; you’re just getting more debt!

Truth Debt consolidation is indeed a way for you to pay off one debt by getting another debt. But not all debts are equal.

As an example, let’s say that you owe $10,000 and the loan is set up so that you have to pay 22% interest. For example, let’s suppose that I go to my credit union and work out a deal to borrow $10,000 at 12% interest. While both debts are still in the amount of $10,000, the debt at 12% interest is a better deal for me. I won’t have to pay as much per month or, if I make the largest payments I can, I can pay it off sooner.

Myth #7 Debt consolidation requires you to be a homeowner.

Truth There is a grain of truth to this, in that owning a home certainly offers an advantage to anyone who wants to consolidate debt. (It doesn’t matter if your home is paid for or not, but you do need some home equity.) But, you can consolidate debt without owning a home, too.

Myth #8 Debt consolidation will make it harder for me to get future loans.

Truth In most cases, it is unlikely that anyone but a forensic accountant could figure out that you consolidated your debt (unless you go through a debt consolidation companythat might leave a paper trail).

If you borrow money in one loan and then take out another, more advantageous loan to pay off the first one, you’re more likely to leave a paper trail of somebody who pays off debt responsibly. It is more likely to make you a desirable creditor.

Myth #9 People who consolidate debt just wind up digging themselves in deeper in debt!

Truth It is absolutely possible to consolidate your debt and then keep spending and get yourself in a huge mess. That’s why you need excellent information and a plot to pay off your existing debt, manage your finances now, and start plotting for your financial future.

There is no reason that debt consolidation cannot work to get you out of debt for excellent, but you have to have a plot.

Myth #10 Debt consolidation will allow me to write off some of my debts and it will stop bill collectors from calling.

Truth Let’s take these one at a time.

Unlike bankruptcy, debt consolidation will not allow you to write off any of your debtnot a penny of it. Whatever you owed as a debt before debt consolidation is the amount you’ll owe after debt consolidation.

The advantage is just that you structure it in a more favorable loan. You do not get existing debts cancelled or decreased! Now it’s right you can work that out in other debt management solutions (debt settlement lets you reduce debt, bankruptcy will let you write some debt off) but they come at a very high price. Both of these approaches will have a negative impact on your credit score, will make it hard for you to get future loans, and stay on your record for quite a while. Bankruptcy, in particular, is an extreme solution that involves an actual court proceeding and a judge who has the authority to make certain decisions about your financial situation (including forcing you to sell some items to pay off debts).

Debt consolidation can only stop bill collectors indirectly. Here’s how: let’s say you have six debts and you’re getting calls all of the time. If you consolidate your six debts into one large debt consolidation loan at more favorable terms, you’ll pay off all of those debts. Bye-bye, bill collectors!

But, if you don’t pay off your new debt consolidaiton loan on time, the bill collectors will start calling again.

The real estate industry has been going like gangbusters for several years now across the United States. This strong market has been fueled by several different factors that have all come together at the same time. More buyers than sellers, a shortage of land and new houses as well as record low interest rates are a few of the main reasons this is right. These factors have all made the prospect of a refinance home loan very inviting for anyone who has been making regular mortgage payments on a home for at least a few years. The people who have built up excellent credit and equity can now take advantage of the many different things that home mortgage refinance has to offer them.
The real estate industry is currently one of the strongest in the country. While some areas west of the Rockies are showing a small slowing down pattern, things out West in places like California are still very excellent. The ROI (return on investment) percentages are through the roof in most areas. People who invest money are making huge profits in very small amounts of time. This is due to the fact that most places have more buyers than sellers and houses are selling very quickly. In some areas like Los Angeles County most houses are selling within one or two days after being placed on the market.
Developer/Investors are not the only people making money in the real estate industry these days. Many people who bought their homes before this sudden rise in housing prices are learning that the home they live in is a goldmine. They realize that the property they bought ten years ago is now worth four times more than it was a decade ago. This means that they now have a significant amount of equity because any increase in your house price is basically money being deposited into your equity account.
Ambitious homeowners have been cashing out some of this increased equity with a refinance home loan. A lot of these people are then putting most of that money back into their most vital investment (their house) by remodeling, adding on a room or two, a pool or anything that will bring up the appraised value of their house. Often times this rise in value will pay for the loan and then some, depending on the area where the house is located as well as the state of the real estate market.
Another smart thing that a lot of people are doing with their recently gained equity is consolidating their credit card and personal loan debts with a refinance home loan. This can be very helpful to lower the amount of money you pay each month in payments and it will also save you time by putting all those debts into a single payment each month. The interest rate on your refinance home loan will be significantly lower than the interest rates of any credit card or personal loan. You will not only save money each month but you will also have your stress level reduced by eliminating those high interest credit cards and/or personal loans. In this case, not looking into home mortgage refinance to reduce your debts would be like throwing money away every month on high interest rates.
If you have been making regular mortgage payments each month for several years and you have not been delinquent with any other bills then your credit should be a lot better than it was when you signed your first mortgage. With your excellent credit and the low interest rates these days you will benefit greatly with a home mortgage refinance. The increased equity in your house that you may be enjoying due to the current hot state of the real estate industry nationwide can be used to your advantage. Cashing out some equity with a refinance home loan could be a very useful tool to save/make you money and reduce your stress level each time you sit down each month at your desk to carry out the dreaded chore of your monthly finances.
© 2006 Copyright. Michael Connelly