Consolidation of debts is often opted as a last resort to manage accumulated debts. However many free advisers would warn you against availing the same. Some claim that consolidating loans is like putting all your eggs in the same basket and thus it is too risky for a person with poor financial situation. In contrast, a majority of professional loan experts favour consolidation of loan as a positive step in the right direction to mend your past credit karma!
Herein I have compiled a quick borrower’s guide to answer all your queries regarding debt consolidation loans. I have made an effort to help you know why debt consolidation is answer to your bad credit situation.
First things first, what are debt consolidation loans?
When you have multiple loans from different lenders and you find it difficult to repay or manage them every month, it is time to simplify things by merging your debt burden. When you opt for debt consolidation loan, you basically apply for a larger loan to repay your all debts including credit bills and personal loans, with a single monthly instalment. The consolidations loans are available as secured as well as unsecured loans for bad credit.
The purpose behind consolidation loan is to make your monthly debt burden low. By consolidating your loans you intend to make your single monthly installment loan lower than sum of your previous pay outs. However it is important to know here that reducing monthly debt burden may increase the overall duration of loan. You can consider using a professional loan advice to find a middle way to save maximum on the interest rate. Most borrowers opt for debt consolidation loans for ease of repayment and to stay afloat.
Why consider debt consolidation loans for bad credit health?
It is important to know why you need consolidation of loans before applying. Debt consolidation should and is the last resort loan in many cases. You must consider consolidating loans when:
- You are struggling to manage a number of instalments every month
- Struggling to bear the burden of loans from your current income
- You have loans at high interest rate and cheaper loans are available
- You need to lower debt burden to stay afloat or to protect your credit score
Using debt consolidation, you target ease for loan repayment and successful maturity of loan. With poor credit it is advisable to go for private loan partners. Using a broker’s advice you need not bother about past credit history, credit check, guarantor availability and upfront fees as these broking agents work particularly to help borrowers avail loans to improve their credit situation. They guide you to avail loans with ease.
Making a final decision– Secured or Unsecured Loans?
Being a homeowner you can avail a long term debt consolidation loan at low price. However many borrowers tread carefully when it comes to availing loans against their residential property. When you apply for secured debt consolidation loan, there is no risk as long as you successfully repay the loan; while if you have apprehensions about a secured loan, you can opt for unsecured debt consolidation loan for bad credit. Being a home owner a private broker can help you find better interest rate. Main street lenders stay away from unsecured loans with bad credit.
How to avoid risks associated with consolidation loans?
All in all, there are no or minimal risks offered by debt consolidation loans. It all boils down on how you manage your situation. Staying in poor credit situation is a financial suicide. You cannot borrow or live with poor credit show for long. By consolidating your loans you get one fair chance to mend your poor credit situation and that too with total grace and self esteem.
Using professional loan advice you can get answer to all your loan queries and draft a successful debt management plan.