It is an unfortunate truth that more and more people are struggling to meet their monthly debt repayments, and that an increasing number are applying for bankruptcy. But there are more constructive solutions to this problem and, in many respects, seeking a debt consolidation loan with bad credit is more desirable.
The reason that bankruptcy should be a last resort is that the consequences can be severe and last a significant length of time. This is mainly because it involves writing off debts without actually repaying them. But consolidation makes clearing debts immediately more practical, and with no great damage to a credit reputation
But as with all loans available, there are conditions to getting debt consolidation loans, and securing the right terms is essential if the exercise is to be of any real benefit.
So, what exactly is consolidation, and how can getting a debt consolidation loan with bad credit be of any really benefit to a borrower? While some might say taking on a new loan is a negative move, the benefits are pretty clear.
The key concept behind consolidation is that funds are secured to buy out the existing debts in one go. By clearing debts immediately, and replacing them with a single, more cost-effective and more manageable debt, the pressure to meet repayments is lessened.
Simply put, 4 individual loans will each come with 4 individual interest rates that together prove to be more expensive than a single interest rate on a single loan would be. So, a debt consolidation loan can be used to lower the pressure to meet monthly obligations.
Key Advantages of Debt Consolidation
Of course, while making monthly repayments easier to meet is a definite advantage, there are more benefits to be enjoyed. For example, even getting a debt consolidation loan with bad credit presents an opportunity to achieve an improved credit score.
This is because repaying any debt affects the credit report, and ultimately improves the credit score a borrower has. By clearing debts immediately, the improvement can be significant with 3 or 4 or 5 loans all being repaid in one go.
However, there is also a significant improvement in the debt-to-income ratio of the borrower. Depending on the terms of the debt consolidation loan, the monthly obligation can fall by as much as 50%. In some cases, the term of the loan is a lengthy 30 years. This slashes the size of the repayments, thus increasing the excess income available.
Choosing The Right Debt Consolidation Program
So, how can an applicant find the right terms, and the right consolidation program? Well, it does depend on your specific debt, but the good news is that securing a debt consolidation loan with bad credit is not a major feat. After all, the purpose of consolidation is to help bad credit borrowers anyway.
Qualifying for these loans comes down to criteria that are similar to those for regular loans, but there is usually an insistence that full-time employment be held for at least 6 months before submitting the application. The advantage of clearing debts immediately makes the wait (if necessary) worthwhile.
And like so many financial products, the best place to get a debt consolidation loan is online where a selection of professional debt consolidation companies can be found. However, check their terms and conditions closely as a fee is required for their services, which can affect the effectiveness of the consolidation agreement.