Debunking the negative aspect of taking out a financial loan

Financial loans have many negative connotations attached to them. While some are understandable concerns, some are downright myths. Let’s take a look at the negative beliefs surrounding loans and debunk them with some truth.

Debt settlement is a form of bankruptcy

False. Debt settlement is an alternative to bankruptcy. It involves negotiating with your lenders to reduce the amount you owe in exchange for a one-time payment. You can either do it yourself or use a company specialising in debt negotiations. The agency company can repay the agreed amount as you pay them in monthly instalments.

Interest rates will always be high

Short-term loans are likely to have a higher interest rate compared to personal loans. Lenders usually display their interest rates on their websites, together with comparison rates. Thus, the range should never come as a surprise.

Personal loans can ruin your credit score

Having a personal loan on your credit file cannot ruin your rating, but it can impact it. In isolation, a personal loan is safe for your credit score. If you keep up with all the payments and submit them on time, a personal loan cannot harm your credit score. Lenders look at your total exposure to loans in their credit history check.

You will have poor credit as long as the bankruptcy information stays on your credit report

You should expect a dramatically lower credit score following a bankruptcy declaration. However, you can build it back up and crack a good score in a few years. Smart credit management habits can help with that.

Debt consolidation will leave you in more debt

Debt consolidation may actually help you to become debt-free quicker. Consolidating debt with a personal loan, for instance, can give you the exact time that you will finalise the payments. However, the decision to not apply for more credit lies solely on the borrower. If you use debt consolidation as a means to free up more credit, you may end up with more debt than you had before.

Contact Empowered Finance, and we can debunk more myths about financial loans.