Bad Credit - Consolidation

Bad Credit Consolidation
Consolidating Your Debts With Bad Credit

One of the best tools that people with bad credit can use to improve their financial situations is debt consolidation.

Debt consolidation is a process that uses a loan to pay off many or all of a person’s outstanding debts such as credit card bills or medical bill. The person then pays off the loan they have taken out to pay off the debts. The process is called debt consolidation because it consolidates several debts into one.

Consolidation doesn't eliminate debts

The thing to remember about this process is that it doesn’t eliminate or void debts like bankruptcy does. Instead it transfers the debts from one creditor to another. The person will still have to pay off the debts in debt consolidation.

This means that debt consolidation is a very good option for people who have the money to pay off their debts. It can make it easier to pay off debts because many payments are reduced into one.

Improve your credit score with debt consolidation

Debt consolidation can improve a person’s credit score because their credit record will show that a number of debts have been paid off. This makes debt consolidation a good alternative for people who are trying to improve their credit scores in order to buy a car or get a mortgage.

In the case of a person with very bad credit it might take several months or longer for debt consolidation to fix credit scores. The person may also have to contact the credit bureaus directly and tell them that they’ve paid off their debts.

Those who can’t pay their debts because they don’t have the funds to do so should avoid debt consolidation. People who have consolidated their debts still have to pay their debts. There is no advantage to exchanging several bills you can’t pay for one bill you can’t pay.

Advantages and disadvantages with debt consolidation

The only advantage debt consolidation might give a person is that it could reduce the amount they to pay out. The disadvantage to this is that it will take longer to pay the debts so the person will be in debt longer.

Individuals facing calamities such as job loss and medical emergencies should avoid debt consolidation. Instead such individuals such look into bankruptcy which actually eliminates debts by discharging them.

One disadvantage go bankruptcy is that it puts you at the mercy of the courts. The court can still order you to pay debts and seize your assets to pay debts with if you declare bankruptcy. Another disadvantage is that most people have to pay a lawyer when they apply for bankruptcy.

Consolidating debts can be way to overcome bad credit but it isn’t an answer in every situation.