There are various myths about debt consolidation plans. The myths are based on irrelevant facts and aspects. Today we shall be learning myths about debt consolidation loans that do not hold value or meaning.
A debt consolidation plan is a method of combining all the unsecured loans into a single loan. The financial institutions of Singapore do this task. Singapore is the first country to launch a debt consolidation plan in 2017. The citizens of Singapore on the permanent residence of the country are only eligible for this plan. Any other third party or a nonresident does not stand valid under the criteria of Fast personal loans Singapore. The main motive behind the idea is to reduce the burden of loans on individuals.
DCP IS USE TO REDUCE DEBT
A lot of individuals are under the impression that the debt consolidation plan is used to cut the number of debts. This is not at all true. The fact holds no logical reason behind it. People think that consolidation plans cut down there actual amount of loan. This confusion arises due to the unawareness of the program. Debt consolidation is the method of summing up all the loans together into a single loan. Financial institutions make this arrangement.
In this plan, the financial institutions pay back your existing unsecured loans. Once the current loans are paid, the institutions calculate the amount paid them. The amount is summed up and shown as a single loan. On this single loan, the institution charges its interest rate. The individual can decide the tenure of the loan. The tenure lasts for 7 – 10 years of time. This happens only in Singapore.
SAVE INTEREST AMOUNT
This is the biggest myth about the debt consolidation plan. People think by opting for debt consolidation amount they save themselves from paying more interest. This is not at all true. The working happens like this. First, the financial institution pays your existing unsecured loan amount to the other financial institution from which you have borrowed the loan. The amount paid to the financial institution includes the interest amount of the old financial institution.
The debt consolidation financial institution clears all your amount of unsecured loans with interest. After this, the amount paid by the financial institution is calculated. Once the calculation is over, you arrive at a single colossal amount. Now, this becomes a loan to the debt consolidation institution. On this amount, the debt consolidation institution charges interest rate and period of the loan. The interest rate ranges from 8 to 10% of the loan. So, basically, either way, you have to pay the interest amount. You cannot escape from this. Thus clear the Smith from your head that debt consolidation reduces your interest amount.
REDUCES CREDIT SCORE
The biggest myth about debt consolidation plan is it reduces your credit scores. This is not true at all. Let’s study how this myth came into existence. The debt consolidation financial institution pay the unsecured loan with interest in one shot. This clears the credit immediately. When another financial institution clears the loan than by the person, it leaves a wrong impression. It gives the idea that the person is not capable of paying back the mortgage. Thus he has asked for another loan from another financial institution. By this, the credit score of the individual decreases. This fact is based on cooked stories. Let us study the real fact.
When the debt consolidation financial institution pays back the loan, the loan gets cleared in one shot. One-shot the entire loan amount along with the interest amount, is paid to the lender bank. When this happens, you come in the good books of the lender bank. This is because you have paid back the loan before the completion of the tenure. You are receiving such a massive amount with interest benefits in the bank. This, in turn, increases your credit score ability from the lender Bank. So, keep the myth out of your head that, debt consolidation plan reduces your credit scores.
It is always said that debt consolidation plans are expensive. This is the biggest myth of all time. If you are smart enough, you will never make this statement. The debt consolidation plan is often taken by individuals who imply logical thinking in their decision making. Debt consolidation plans usually last for 7 to 10. The individual who takes a debt consolidation plan has to opt for 7 to 10 years. But that’s just a criterion. People assume that they have to pay a tremendous amount of interest for so many years. But if you imply logical thinking, you will find it fruitful.
The interest rate you pay on unsecured loans varies from 25 to 30% in Singapore. This interest rate basically implies on credit card loan. The interest rate of the debt consolidation plan varies from 8 to 10%. Now the difference and the interest rate are quite vast. But one disadvantage of debt consolidation plan is the tenure of the loan lasts for many years. Thus saving the difference interest amount becomes difficult. Now letters tell you how you can escape from paying more interest.
It is in your hand to pay the loan for ten years or complete it before the time. The amount you are saving on the interest rate of the previous bank can be used to pay the existing loan. Sum up the total amount of the interest rate which you saved and make huge payments. When you make huge payments, the loan is cleared fast. Thus make sure you clear the debt consolidation loan as soon as possible.
DEBT CONSOLIDATION PLANS ARE TIME-CONSUMING
Yes, it is true that the plans last for 7 to 10 years. But it is entirely in your hand to pay back the loan. You can clear your loan either in 10 years or in 5 years. It’s entirely up to you the amount of payment you make. The more the amount you pay, the lesser the tenure will be.