Let’s face it, it’s far easier to get into debt than it is to get out of debt. This is in part to the many common myths surrounding debt that leads to confusion and poor judgement when dealing with your creditors. It makes negotiating with your lenders quite difficult. If you are struggling with loans or debt of any kind, talk to a debt or loan attorney to get the answers you need. Here are some of the most common loan myths – debunked.
YOU SHOULD BORROW MORE THAN YOU NEED, JUST IN CASE.
This is a common myth about personal loans that has negative far reaching consequences. Over time, you will incur interest fees on the money that you borrow, so taking out even a small sum of extra money can cost you a significant amount in the long run. Borrowing more than you need can also deter you from saving money and make you overly reliant on your loans.
IF I HAVE BAD CREDIT I CANNOT GET A LOAN.
This is not necessarily true. Although having bad or no credit can make it very difficult for you to get a loan, especially from very large institutions, you will likely be able to find a creditor who will lend to you. Often the rates are higher and the terms more onerous. Exercise caution when taking out any new loan, and always research a lender’s reputation, interest rates and fees, before making a commitment.
A CREDIT CARD IS ALWAYS MORE EXPENSIVE THAN A LOAN.
If you have a very high credit score, you should be demanding a competitive and low interest rate. It’s harder to get a competitive interest rate when you have mediocre or low credit score. Sometimes you can’t even secure a loan with a bank or credit union. That’s when people turn to credit cards. Having a high rate credit card is not necessarily expensive if you pay off your credit card balance every month – you won’t incur interest on the balance. People get into financial trouble is when they fail to pay the credit card balance off in full. That’s when the high interest rate on credit cards can be devastating. It’s a slippery slope. Each month the high interest on the balance increases the total amount due, causing borrowers to pay only the minimum payments required. That’s when you need to speak with a debt or loan attorney for legal relief.
INQUIRING ABOUT LOAN RATES WILL HAVE A NEGATIVE EFFECT ON YOUR CREDIT SCORE.
Looking into the potential loan rates does not actually count as a ‘hard inquiry’ which affects your credit score. You can obtain information about credit limits and interest rates from as many lenders as you want prior to choosing one, without it having any effect on your credit. Only the loan you finally apply for will be considered in calculating your credit score.
IF I FILE FOR BANKRUPTCY I WILL NO LONGER BE RESPONSIBLE FOR PAYING MY LOANS.
This depends on which type of bankruptcy you file. A Chapter 7 personal bankruptcy allows you to liquidate all of your debt while a Chapter 13 personal bankruptcy provides for the repayment of some or all of your debt. How your debt is categorized will have an impact on how you will be required to repay your debt. Loans can be either secured, (home or car loans) or unsecured (credit cards and most personal loans.) Also, you may not be relieved from paying delinquent student loans or certain federal tax obligations. Filing bankruptcy can be complicated and overwhelming. If you are struggling to pay off your loans and other debts, speak first to debt attorney David Soble to see what other options exists for your situation.