If you have more than a single loan to repay and the stress is becoming too much, you may want to explore some of the ways that you can get rid of all the debt. Nowadays, it has actually become quite common for people to carry more than one debt. This is not that surprising, considering the unstable economic environment that we all live in. Managing regular monthly bills is hard enough on its own, but when an emergency expense gets into the picture, things usually start to get messy. Of course, there are many reasons for a person to take out a loan:
You may want to buy a house and taking out a loan is probably your only option
- Or you may want to invest in your future, and as most people know, it is not so easy to afford college these days. In fact, for many people, it is nearly impossible to pay for their education without financial assistance. And so, you may take out a student loan.
- There are, of course, many times where taking out a loan is not something that you have planned. It is rather a short-term solution to a current financial problem.
Whatever your reasons for having multiple debts, the important thing is how you are going to deal with all your debts and regain financial stability.
Dealing with multiple debts
There are different ways for a person to deal with his multiple debts. However, most of your options will disappear if you do not have a good credit score. Even the most popular and common method of dealing with multiple debts – debt consolidation, normally requires a good credit score. However, these days, more and more people are really struggling to sustain good credit scores and so debt consolidation options requiring stellar credit score are not viable to the majority of people in debt.
The good news is that debt consolidation with bad credit is not impossible. It could be harder, but definitely not impossible. Although the general understanding is that taking out a debt consolidation loan will bad credit will most likely get you nowhere, there are many private debt consolidation companies that offer their customers reasonable terms even if their credit scores are bad. But before we focus on bad credit debt consolidation loans, let’s first explain what a debt consolidation loan is and how it works.
What is a debt consolidation loan and how does it work?
Simply put, a debt consolidation loan is the process of taking out a brand new, large loan, that is a combination of all your current debts that you are looking to consolidate. Combining your multiple debts into a single loan gives you many benefits. Not only are you likely to get better terms on your debt consolidation loan compared to the loan terms of all of your existing debts (including interest), you will also have to think about only a single monthly payment instead of exhausting yourself with keeping track of multiple bills to pay each month. Having just a single monthly payment that takes care of all your debts is going to make your life a lot easier, as it is going to save you time, let you focus on your other bills and life problems. That single monthly payment is also going to be lower than the combined payments of your multiple debts.
Dangers of debt consolidation loans
If a debt consolidation loan is executed in the right way, it can be the perfect solution for dealing with multiple debts. It can lower your interest rate and monthly payments and it can help you to reach the point of debt relief a lot faster than you would without it. However, a bad debt consolidation loan, with terms that are worse, or at least not better than the terms that you already have on your loans, will not only cost more at the end, but the whole process of repaying your debts could take a longer period of time. Debt consolidation loans can be dangerous, especially when you are taking a debt consolidation loan with a bad credit score. That, of course, depends on the loan lending company that you choose to work with and the specific financial situation that you are in.
Debt consolidation loans with bad credit
If you are in a situation where you already have trouble with your credit score, having to deal with multiple high interest rate loans at the same time can make your life a living hell. Now, even though debt consolidation loans are available to people with bad credit score if you are expecting to get significantly better terms on your debt consolidation loan, especially the interest rate, you will be quite disappointed. In most cases, it is really hard to qualify for a debt consolidation loan with a low interest rate when you have a poor credit score. However, even though you may not be able to lower the interest rate on your loan, with a poor credit debt consolidation loan, you may still be able to lower your monthly payment.
And that is a benefit that should in no way be overlooked. Being able to lower your monthly debt payment can have a huge impact on your overall financial stability, as making your monthly debt payment is going to be more manageable, therefore, your life will be a bit easier. That basically works like this – in order to lower your monthly payment, you will most likely have to extend the repayment period of your debts. That, of course, has both a good and a bad side. Although your monthly payments will be lower and, therefore, easier to manage, having to make those payments for a longer period of time will mean that you will pay more on interest in the long run.
What should you do?
The only way to accurately evaluate your options is to do proper research on different loan lending companies. Find the ones that offer best terms for poor credit debt consolidation loans, and see what you will be able to get. You may find a loan lender who can give you really good terms for your debt consolidation loan even if your credit is bad.