Bad Credit - Consolidation

Bad Credit Consolidation
Debt Consolidation Loan Very Bad Credit

A debt consolidation loan is an excellent means of improving your credit rating and simplifying your debts. The way a debt consolidation loan works is very simple, the debt consolidation loans you enough money to pay off all of your creditors. Once this is done you have to make payments to the debt consolidation lender instead of the creditors every month.

Advantages of Debt Consolidation Loans

A debt consolidation loan can improve your credit rating because you’ll have a record of paying off your bills. The credit bureaus should raise your credit rating if you do this, which means that you might be able to get more credit in the future. This can make it easier for a person to get a credit card, a mortgage or a car loan.

Debt consolidation loans can also simplify your finances because you will only have payment to make each month instead of several. This can reduce the possibility of missed or late payments that can affect your credit rating.

Another advantage to debt consolidation loans is that they can lower your interest rate. If the debt consolidation loan has a lower interest rate than your existing debts that can lower the amount of money you pay each month.

Disadvantages of Debt Consolidation Loans

A big disadvantage to debt consolidation is that it can reduce the amount of credit available to you. If the credit cards or lines are credit get cancelled because of the debt consolidation they may not be available to you in the future. Always make sure the debt consolidation will not cancel your credit cards or lines of credit before you get it.

Another drawback to debt consolidation is that some debt consolidation plans require you to enter into credit counseling. Most of this credit counseling is a waste of time and money because it simply involves somebody telling you to pay your bills on time and not to spend beyond your means. You probably already know those things so you don’t need to pay somebody to tell you that.

Where to Find Debt Consolidation Loans

A wide variety of debt consolidation loans are available online for those who are willing to look for them. Typing the words debt consolidation into a search engine should produce a list of such lenders.

When you are looking for such lenders make sure you are simply getting a debt consolidation loan and not signing up for some sort of credit counseling. Many credit counseling schemes will put a credit counselor who is not a financial expert in charge of your finances.

What to Look for In Debt Consolidation

The first thing to look at when you are applying for a debt consolidation loan is the interest rate. Make sure it is lower than the interest rates charged on the debts you are consolidating, if it isn’t you will lose money.

The next thing to look at is the terms included in the fine print, make sure you are only getting a loan. Many unscrupulous lenders will try to get you to pay for extra services such as credit counseling and credit protection. These services are usually a waste of money that does you little or no good.

For example credit protection usually involves sending you a copy of your credit report you can get for free elsewhere. Debt consolidation can be an excellent step for people with bad credit if they get the right debt consolidation loan.