Is Debt Consolidation a Wise Idea?
Do you have multiple debts such as credit cards, personal loans, medical bills and payday loans? Is it becoming more and more difficult to manage all the repayments for each debt? If so, a debt consolidation loan may be the answer for you. Debt consolidation involves rolling all your existing loans and credit card debts into one simple loan. This can help to make your repayments easier and give you a bit of breathing room with your finances. There are many debt consolidation companies to choose from – it will depend on your personal circumstance as to which is right for you. You can use debt consolidation companies for payday loans, credit card debt and there are even debt consolidation loans available for bad credit if you’re in the military. There can be huge benefits to using a debt consolidation loan, like paying less in fees and interest. There can, however, be problems if you still can’t meet the repayments on the new consolidation loan.
The Types of Debt Consolidation Loans Available
There are two main types of debt consolidation loans – secured and unsecured. Secured loans use collateral, like equity in your home, to secure the loan against. Usually, secured loans offer better interest rates than unsecured loans. The main risk with loans that are secured against your mortgage is that the lender may foreclose on your property if you can’t repay your loan. Unsecured loans don’t require any collateral and are generally easier to obtain. You can usually apply online and most lenders offer instant approval.
Advantages of Debt Consolidation Loans
There are many advantages to debt consolidation loans. Apart from simplifying your monthly repayments, they also may save you money on interest and potentially actually increase your credit score. Often credit cards have higher interest rates than unsecured personal loans. Rolling your credit card debts that may have interest rates of 18% to 20% into a debt consolidation loan with a rate of, say 16%, makes sense.
You can ultimately increase your credit score with a debt consolidation loan. Once you transfer your credit card or other debts into a debt consolidation loan, the balance on your existing credit cards or loans will be zero. By not using that available credit, you will increase your credit score.
Where to Find the Top Debt Consolidation Loans for Bad Credit
It’s easy to get caught in the cycle of only paying the minimum monthly repayment when you have multiple credit cards. Unfortunately, this means you fall far behind in getting the credit card debt under control. It can also potentially lead to missing repayments which may lead to a bad credit rating. So what can you do if you have defaulted on your credit card repayments? Fortunately, there are several companies who offer instant debt consolidation loans for bad credit. You can apply online and get instant approval. Here are two companies that offer debt consolidation loans online, even if you have a bad credit score:
Signature Loans – loans from $1,000 to $35,000. Perfect credit history is not required, and approval is immediate. Interest rates vary from 5.99% to 35.99%.
Bad Credit Loans – loans from $500 to $5,000. Funds can be available as soon as the next day. Interest rates vary from 5.99% to 35.99%.
Are There Alternatives to Debt Consolidation Loans?
Instead of a debt consolidation loan, you may want to consider one of the many debt consolidation credit card offers that are available. This involves transferring your existing credit card debt (or multiple debts if you have them) to a new credit card that has 0% or low-interest rate for a fixed term. This allows you to pay your credit card debt off more easily as you won’t be paying high interest rates. Unfortunately, you do need to have good to excellent credit history, so this option may not be suitable if you are in default with your loan or credit card repayments. Also, you may not be able to transfer the full amount of debt you have. This depends on your personal circumstance and your ability to repay the loan amount.
If you do qualify for a debt consolidation credit card transfer, it is important that you pay the debt off within the timeframe, so you don’t end up paying interest again. Once you’ve paid the card off, keeping the account open and under control will help increase your credit score.
Debt consolidation loan – Is it a Wise Choice?
Most of us probably have at least two credit cards and a personal loan. As long as each monthly repayment is being met, there’s no real need to consider debt consolidation. However, once you’re at the point that you are struggling to make the repayments and are in danger of defaulting on your debts, you may want to contemplate simplifying your finances with a debt consolidation loan. If managed responsibly, debt consolidation loans are an easy way to take the pressure off having to repay multiple loans and credit cards. Your credit score may even improve if you stick to your budget and don’t start using the original credit cards again. It’s definitely better than filing for bankruptcy! As always, it’s best to do your research and find the solution that suits you.