Misconceptions of debt consolidation?

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As mentioned above, the term debt consolidation has been used and misused as a sales process by unscrupulous bankruptcy operators. There are many other misconceptions related to debt consolidation to, such as the below.

Common Debt Consolidation Misconceptions

  1. Misconception 1 is where a Debt Consolidation Loan is a Part 9 Debt Agreement; or a different form of bankruptcy. However, debt consolidation is not a part 9 debt agreement.
  2. Misconception 2 is that Debt Consolidation always lowers your repayments. Even though this is the goal, not all debt consolidation will reduce your monthly repayments. As such, your assessment will advise your expected payments.
  3. Misconception 3 is that Mortgage Debt Consolidation always lowers your interest payable which is not correct. For example, refinancing a 5-year personal loan to a 30-year home loan term may reduce your monthly payments. Consequently, the interest paid over the 30-year term may end up being higher.