The best way to define a debt consolidation loan would be to consider it to be a personal loan. This loan type can be used only when you have more than 2 loans or debts to repay at the same time. This is when this loan comes handy because you can club all the loans together and pay the instalment once a month instead of paying smaller multiple instalments throughout the month. The two broad benefit classification of consolidating debts together either through credit cards or through the existing loans would be:
- The monthly instalment gets reduced because the interest rate decreases considerably.
- The scope of missing the instalment is less because it is just one payment that you pay once a month. Instead of the multiple loans where you go on paying the instalments all through the month for the different loans.
Unfortunately people suffering from a financial crisis have a bad credit history with the well reputed banks from where they have taken the loans. If you are planning to avail a debt consolidation program in spite of having a bad credit score, then there are a few important factors that you need to keep in mind. Through this post, we will assist you about the important factors that need your attention.
- Understand the Bad Credit You Have – The most important thing that you need to do is check the copy of your credit report. This will give you the opportunity to know the kind of soup you are in. Not just that but you will also get to check what all are listed in that copy. There is a list of items that you need to check in the copy and see if you have any of them in your credit report or not. The items are:
- Credit defaults
- Excessive enquiries
- Multiple credit files
- Summons or writs
Cross checking which of the following items match with your bad credit will filter down the types of lenders whom you must go to in order to get a debt consolidation loan. There are several lenders who offer this loan in spite of your bad credit record. So make sure you look for them so that they can bail you out from the financial crunch. One of the most common practices of people in such situations is to apply to random lenders with the hope that someone will come forward to help you. However, never make that mistake because it will increase their scrutiny to further check and enquire about your credit report.
- Know the Exact Debt Position You Have – In case you have multiple loans and pay instalments all throughout the month, then getting the debt consolidation loan is the best solution for you. However, the solution does not end there and you need to further inspect the credit cards or the loans. The reason for this inspection is to find out which loan types or credit cards to consolidate together under the debt consolidation program. The reason for assessing that is primarily because several loans or credit cards have a high interest rate and hence you need to club them together. However, there are several loan types with a lower rate of interest and in case of those there is no need to club them together. Before jumping on to the debt consolidation loan it is important that you analyse all the different debts so that you make the most of this opportunity. You also need to be clear about the secured as well as the unsecured loans and also know the differences that they have. You also need to know about the penalty fees in case you miss the date of repaying the debt or repay them after the due date. Assessing all these together can be tough and that is the reason it is best to consult with the lender and clear all the doubts that you have.
- Communicate First with the Lender – Communication is the biggest solution that gives answers to all your doubts. Therefore, it is better talk it out with your lender or the financial adviser you have before you decide on the loan type you want. The financial problem varies from one person to another and that is the major reason why you need to consult and know the loan type that suits you and your problem the best. The valuable information that they provide is important because of the kind of assistance they provide helps you to come out of your financial crisis at a faster rate and in a smooth way.
So there is a silver lining that offers debt consolidation programs after the dark cloud of financial crisis with a bad credit record. For those who lost hope of getting loans because of their bad credit history can heave a sigh of relief now.