Debt is becoming more and more of an issue nowadays and it is really hard for many people out there to deal with the current economic environment. Paying regular monthly bills is something that more and more people are struggling with. While there is no denying that the issue of debt is quite a serious one, it is also important to know that there are many ways that you can actually tackle debt and come on top in the end. There is a lot of misunderstanding that people with bad credit scores are unable to get rid of multiple debts because their credit score would not allow them to qualify for a method for dealing with multiple debts, such as a debt consolidation loan. The reality is a bit different. The truth is that nowadays, because of the fact that the loan lending industry has had a tremendous growth in the last two decades, there are numerous private loan lending companies that often tend to work even with customers that do not have stellar credit scores. If you are carrying multiple debts and do not have a perfect credit score, and you are looking for a way to get rid of all your debts, you may have just come to the right place.
What is debt?
You need to have a complete understanding of what your problem is in order to be able to deal with it more efficiently. Debt is basically an amount of money, services or goods that you owe to someone. In most cases, people owe a certain amount of money or a valuable possession to a financial institution like a bank or a private loan lending company.
Different types of debt
People can find themselves in debt many different ways, and the types of debt are also different. We can mainly talk about two types of debt: secured and unsecured. However, this is just a general way to categorize debt as there are many different debt types.
Unsecured debts can have many different forms. Examples of unsecured debts include credit card debt, unsecured personal loans, student loan debts, payday loans and others. These are debts that you have not secured by offering a property as a collateral in order to obtain the amount of money that you owe. Unsecured debts normally have higher interest rates and fees compared to secured debts. But, every person’s situation is different so numerous different loan terms are possible. The loan terms depend on a lot of factors, including the person’s credit score.
Secured debts are debts that you have secured with property, such as your house or vehicle. Secured debts include home equity loans, mortgages, car title loans and others. Because you use a property as a collateral to take out such loans, they usually have lower interest rates and fees compared to unsecured debts. However, they can also be quite dangerous as if you fail to repay your debt on time. You might lose your property.
How to pay off multiple debts
Carrying a single debt is one thing, battling multiple debts is a whole different story. Carrying a number of debts can really make your life a living hell. It is hard enough to manage regular monthly bills, and so when you need to also need to keep track of various debt repayments at the end of each month, things can get really rough. However, there are some methods that you can use to get rid of multiple debts and below we are going to discuss one of them and that is debt consolidation loans.
What is a debt consolidation loan?
Debt consolidation loans are quite possibly the most effective and popular method for consolidating multiple debts. It is pretty easy to understand the concept behind debt consolidation loans and how they work. When you qualify for a debt consolidation loan, you will have to shuffle all of your current existing debts into a single, brand new and larger loan, which is your debt consolidation loan. So debt consolidation loan is the combination of all of your debts summed into a single monthly bill. With a debt consolidation loan, you will be getting new loan terms, including a new interest rate that will mainly depend on the state of your credit score among other factors.
Is it possible to consolidate multiple debts with a debt consolidation loan if you have a bad credit score?
The loan lending industry has progressed in such way that there are now numerous private loan lending companies who offer debt consolidation loans to people with bad credit scores. Of course, qualifying for debt consolidation loan with a stellar credit score is always going to be a lot easier and is always going to allow you to have better loan terms. However, since there are some many different private loan lenders competing for customers, nowadays you can actually find a lender who may offer you pretty good terms even for a poor credit debt consolidation loan. It all depends on your specific financial situation and the loan lending company you are working with.
Bad credit debt consolidation loans benefits
Debt consolidation loans have lots of benefits to offer, even to people that do not have perfect credit scores. Even though a good credit score will always get you better loan terms, that does not necessarily mean that you cannot improve your current financial situation by taking out a debt consolidation loan with a bad credit score. Here are some of the benefits that you will get no matter what your credit score is:
Single bill to pay each month
Regardless of whether you have a good or a bad credit score, by consolidating your multiple debts with a debt consolidation loan, you will always get a single monthly debt payment instead of multiple bills. Combining several debts into just a single monthly payment can have a massive positive impact on your financial situation, as you would be able to keep track of that single payment a lot easier. Therefore, the chances of you missing a payment will be a lot less.
Reduced monthly payment
Whether you are applying for a debt consolidation loan with a bad credit or a perfect one, you would most likely get a reduced monthly payment. A reduced monthly payment can give you enough room in your budget to fit in your regular monthly bills more easily, which will ultimately make your life a lot better to live. After all, when you are trying to get rid of multiple debts, every single dollar you can get may have a huge impact, and a reduced monthly payment could really have an important part in keeping you on the right track all the way through the end of your debt repayment.