Debt and poor credit usually go hand in hand. It is often difficult to determine which came first, especially when a consumer has been living this way for so long.
Some people start with no credit and amass debt from the beginning.
Others build their credit score only to suffer a financial setback that puts them in debt, causing their credit score to decline.
In either case, they should seek debt consolidation advice as soon as possible.
Debt consolidation companies and banks provide information and advice. They also offer debt consolidation loans bad credit borrowers can use to improve their situation. With some forms of debt consolidation, bad credit can be an issue.
This is the not the case with these loans because they are designed for people whose credit scores are low. As long as they do not have a major blemish on their credit report, consumers should qualify for this funding.
Being in debt can lead to both physical and emotional stress
Many consumers owe more money to credit card issuers and lenders than they will ever be able to repay. Some become overwhelmed and live a life of worry and regret.
Others seek debt consolidation counseling because they want to free themselves from this situation as soon as possible. What they learn in their counseling sessions is that with some debt consolidation loans, bad credit is not a roadblock. They can incorporate a loan into a formal debt reduction program and quickly begin reducing their debt.
Unsecured debt consolidation loans are not guaranteed by an asset or another person with good credit. They are used to pay existing debts and then repaid via monthly payments over a predetermined period.
With this category of debt consolidation loans, bad credit may prevent some people from qualifying. Individuals whose credit scores are very low may be deemed too much of a risk.
With secured debt consolidation, bad credit borrowers may find their solution. They submit an asset with a value equivalent to the loan amount, letting it serve as a guarantee against payment. Some lenders allow another person to be a guarantor if that individual has excellent credit.
Though it may be uncomfortable to ask someone else to guarantee their loan, some bad credit borrowers may have to do this if there is no alternative.
Once they are approved for debt consolidation loans, bad credit borrowers should have the money they need within several weeks. If one of the debt consolidation companies is used, that entity will apply the loan funds directly to the outstanding debts. This process can take some time because the company may negotiate a pay off less than the current balance.
When they are exploring debt consolidation, bad credit consumers should consider these loans. They should be able to find some designed for people with their credit rating. Nothing will stand in the way of them repaying their debts and beginning to rebuild their credit score. After a few years, they may even be able to qualify for financing offered by a traditional lender.
With Debt Consolidation, Bad Credit Need Not Be A Stumbling Block
It takes just a few financial slips for people to do serious damage to their credit score. A late payment here, a missed payment there, and soon debt is the elephant in the room. If this becomes the status quo, an individual can accumulate an amount of debt that is literally unbelievable. The fact remains that it is there and without debt consolidation, bad credit will become worse.
The first instinct for many people facing debt consolidation, bad credit, and related issues is to ignore it. This is unwise because no one else is going to fix the problem. Eventually, the situation will cause problems for the spouse or dependents.
Failing to seek debt consolidation advice as soon as the debt accumulates is just selfish. There is no reason for someone to create debt consolidation bad credit headaches for other people due to his or her own poor financial management. Taking steps to correct the situation in the early stages prevents this from happening.
By the time some people decide to pursue debt consolidation, bad credit may already be a reality. There are only so many times that a payment can be made late or missed entirely before the credit rating suffers.
When some consumers realize their credit report now contains blemishes, they really begin worrying. Before, they may have qualified for a personal loan to repay the debt, but what about now? Is there any way to take care of the issue without filing for bankruptcy?
Fortunately, the answer is yes, and the solution comes in the form of debt consolidation loans. Bad credit will not prevent consumers from qualifying for some of these loans. In fact, credit score may not even be verified during the loan approval process.
For those applying for debt consolidation loans, bad credit is nothing to worry about, even if the credit score is very low. They should qualify without any issue, paving the way for debt consolidation. Bad credit is not the only accepted blemish- some lenders do not use home ownership as a criterion for applying.
With debt consolidation loans, bad credit consumers take one loan that allows them to repay all outstanding debts. After these balances are wiped clean, they make one payment per month toward the consolidation loan balance.
A portion of each payment is allocated to interest, which is either fixed or variable. After making the agreed payments on debt consolidation loans, bad credit consumers will have repaid the loan in full and can move on with life.
This loan is just one component of a program for debt consolidation bad credit consumers should utilize. Other aspects include learning how to develop a budget and stick to it and becoming educated about common pitfalls in personal spending.
Consumers also learn how to use credit cards responsibly and how to save for retirement.
Whether they use secured or unsecured debt consolidation loans, bad credit borrowers should find the financing helpful to their situation. By repaying the loan as outlined, they improve their credit score.
Once the loan is repaid, they may be able to qualify for regular loans, credit cards, and other types of traditional financing.