Being neck deep in debts makes life challenging; you not only need a quick remedy for impending loan payments and bills, but you also need a way to improve your credit score and ease your cash flow. A lot of bad credit borrowers consider debt consolidation as a viable means to improving their credit health. For, it legally helps them lower the overall debt burden by merging several loans into a single affordable loan.
However before you begin to search and compare available debt consolidation loans for bad credit, you must know about popular myths associated with consolidation of loans. This will help you borrow pragmatically and save unrealistic borrowing mistakes.
Myth 1: Debt consolidation is one of the best ways to reduce your loan burden.
This is perhaps one of the most common misconceptions about debt consolidation plans. Many borrowers opt for consolidation to save instantly hundreds or thousands of pounds. But that is not true. For a debt consolidation plan can only save you amount on interest rate or what you may be paying earlier due to late payments.
Also many of the debt consolidation plans offer low instalments only because the borrower chooses to pay out the same loan in the longer duration. Herein cost of loan may be more than previous plan. So you must carefully watch out and keep straight expectations from your new loan.
Myth 2: You consolidate loans when you are unable to borrow more.
It is absolutely a narrow opinion on the matter. Choosing debt consolidation is a matter of choice. You may choose to borrow more or close one of the accounts while consolidating your loans. There are no fixed rules of the game here.
Myth 3: Debt consolidation guarantees debt relief.
Again, it would be too impractical to fly on the success of a debt consolidation plan. No one can guarantee you debt relief. You need to make constant efforts to ride successful repayments every time. For example, you may require cutting down all lifestyle expenses and minimising your card purchases to keep your expenses low. Do not forget to use professional loan advice to understand various aspects of consolidation of loans in UK.
Myth 4: Debt consolidation would hurt your score
Well, it would not be fair to believe so. For, with high debt to income ratio and high loan appetite your score is already low. Also the burden of loan on your shoulders would be defined by what type of loan you decide to choose. For example, if you decide to use personal loan for the purpose as against a homeowner loan, the former is going to be heavier for your pocket.
To avoid confusion on the matter, you must use professional help here to locate the best deal. A professional broking advice can also help you get access to the best unsecured loans when you do not have collateral to support the application. The impact of debt consolidation would be significant one but you can ease the red flags over the time by repaying the loan on time.
Myth 5: Debt consolidation is a step towards bankruptcy.
This is a big false claim. Debt consolidation helps save your credit situation to the length of bankruptcy. In bankruptcy the borrower makes a default and does not pay out his dues, however in debt consolidation you pay out your loans with the help of a bigger loan. Herein you can either consolidate your debt with one of your current lenders or opt for other private lenders offering cheaper alternatives. You can use a broking advice to locate available consolidation loans and choose the best one according to your needs.