3 debt relief myths you shouldn't believe
Myths are commonplace in society. And, in some cases, those myths are harmless. However, there are some instances where myths can be harmful to those who believe them. That's especially true in terms of financial myths. After all, if you incorrectly believe that a product that can help you is bad - or that a service that can hurt you is good - you could cause significant damage to your financial health.
One area of finance that seems to be the center of many myths is debt relief. And, since those who need debt relief are typically struggling to make ends meet, myths about these services can be very harmful. Below, we'll talk about three common myths about debt relief and explain why you shouldn't believe them.
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3 debt relief myths you shouldn't believe
It's critical to know the truth about debt relief services. That's especially true if you're in need of relief as misinformation may keep you from getting help. Here are three myths that you shouldn't believe:
Myth: Debt relief is only for people who are behind on payments
While debt relief can help those who are behind on their payments, these services aren't just for them. There are multiple different types of debt relief. Some options are designed to help those who can't afford to make their minimum payments and have fallen behind while other options are designed for those who can make their payments, but don't have a clear way to get out of debt in the foreseeable future.
For example, debt settlement services may be able to substantially reduce your balances and minimum payments if you're struggling to make ends meet. On the other hand, if you've consistently made your payments on time and maintained a good credit score, a debt consolidation loan may offer a lower rate and simplified payoff plan, helping you achieve debt freedom faster.
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Myth: Debt relief always hurts your credit score
There are some debt relief services that may hurt your credit score. Common reasons include:
- Missed payments: The most extreme forms of debt relief, like debt settlement, may require you to miss payments to your lenders while you save to settle your debts. Missing payments will typically cause your credit score to fall.
- Closed accounts: Some debt relief services may close your revolving accounts. And, if you have available credit on those accounts, closing them will lead to a higher credit utilization ratio - which could hurt your credit.
- Reporting: If you settle debts, they may be reported as settled for a lesser amount, rather than paid as agreed - which can have a negative impact on your credit.
But, debt relief services don't always hurt your credit score. "Their impact can vary depending on the type of service and how it's managed," explains Michael Broughton, founder and CEO of the credit-building app, ALTRO. "For instance, debt consolidation loans may actually help your credit score if you make timely payments as they simplify your debt into one manageable payment. Similarly, some debt management programs can assist in negotiating lower interest rates without significantly affecting your credit."
Myth: Most debt relief companies are scams
While there may be some companies that try to take advantage of those in need of dire financial help, the industry overall can provide vital assistance. So it's important not to view all debt relief companies through the same prism. There are several legitimate debt relief programs that have helped consumers find their way out of debt. So, instead of avoiding debt relief entirely, get to know the red flags to look for and use them to avoid any potential scams as you search for relief.
The bottom line
Debt relief myths can be damaging. So, it's important to understand the truth behind them. The truth is that debt relief is for anyone who doesn't expect to be able to pay their debts off on their own within the next few years, not just those who have fallen behind. And, while some forms of debt relief may hurt your credit, others typically don't. Finally, there are debt relief scams out there, but there are also plenty of legitimate companies to work with. Get in touch with one of those legitimate debt relief companies now to get started.
