When speaking to borrowers with debt, the words “Irritating” and “distressing” are just two of many adjectives used to describe their lives as it relates to their debt and bad credit history. It seems there is so much a person may lose out on with bad credit report.
For those who do not know, having a bad credit history is a stigma that a person must bear for something as simple as failing to meet the repayment schedule set out by a creditor. Having a bad payment history makes getting loans tougher and if the loans are approved, they are approved at a higher interest rate. Simply put, a borrower with bad credit history now has a reputation they must bear when it comes to funding.
On occasion, there is a legitimate need to get yet another loan to help repair credit damage due to debt. Think debt consolidation. A borrower must give a lot of thought to the best steps to deal with debt before taking out more loan. In some cases, it is the best option.
A debt consolidation loan is a loan create to help borrowers with bad credit histories and multiple debts still pending. They must apply for a single loan used to pay off all other debts and make paying the debts easier because they are all in one place. On many occasions, the interest rate is better on the new loan than say, credit card interest rate of 27-30%.
Many people are confused as to why we need yet another loan when they are already struggling with the ones they have, and they fail to see the benefits of debt consolidation. With debt consolidation, there are some benefits. The benefits of bad credit debt consolidation are things like:
- The loan will carry a lower rate of interest than the average interest rate of previous debts.
- It is much easier to pay to a single lender than a several creditors and you avoid late payments showing up on your credit report.
- Borrowers get other benefits regarding the loan, especially if you borrow through credit unions, etc.
- The loan allows the borrower to improve on his credit score by simply following the guidelines given by the lender in regards, paying the specific amount monthly, and paying on time.
There may be more benefits not mentioned above that benefit the borrower and likely depend on their specific circumstance.
No matter which path you choose, debt settlement or debt consolidation, it’s recommended you tackle the situation that could help rather that just ignoring it and it gets worse. You can learn more about the differences in my article The Difference Between Debt Settlement and Debt Consolidation
The best advice we can give is to address the issues head on and do something. Ignoring the issues won’t make them go away and can cause problems down the road.
We hope you enjoyed this article. Please be sure to seek adequate counseling with professionals as this article is information only. If you’ve enjoyed what you’ve read, leave us a comment below. You can also contact me with questions or comments.