Bogged down by too many loans to clear off? Are you a victim of a bad credit history and finding it hard to get any more loans? Are you looking for a single loan that will consolidate all your high interest debts? Then the solution lies in a bad credit debt consolidation loan. As the name suggests this loan is specifically for those with a bad credit history and it gives the freedom to repay one single consolidated loan every month at a lower rate of interest.
There are a few types of loans that can act as a bad credit debt consolidation loan and they are secured loans (e.g. against property), personal loans and credit card balance transfer. The rate of interest in all the three varies quite a bit and it is important to understand each loan and choose the one that suits your needs best.
The advantages of a bad credit debt consolidation loan:
1. Finances made easy: The debt consolidation loan is one single loan that will take over the other small and usually high interest loans. These consolidated loans are usually at a lower rate of interest as compared to the many small loans you had previously. Since it is one loan that you need to pay off every month, it saves you the hassle of remembering the number of loans to pay off.
2. A single defined loan term: Since this is a single loan that consolidates all the other loans there is a defined time frame within which you have to pay it off.
3. Stop creditor harassment: Creditor harassment can be daunting. The innumerable phone calls asking to repay the loan can drive anyone up the wall. The bad credit debt consolidation loan can save you from the constant harassment of creditors.
4. Chance of getting more money: With a bad credit debt consolidation loan there is always a chance of getting a higher loan than what you have to pay off. This can be a blessing when you are in a bad financial state. Unsecured loans however have a defined limit.
The disadvantages of a bad credit debt consolidation loan:
1. Fear of losing house/property: If you don’t repay the secured loan on time there is always the fear that you might lose the house/property you have given as security.
2. Cumulative interest: If you increase the time span of your loan there is always a chance that your cumulative amount of interest to be repaid will increase.
3. Excess borrowing: With a secured loan you can get too much money in your hands that you may overspend. You will be able to afford a car you wanted to buy or a holiday you wanted to go to. This will increase unnecessary expenditure thus causing more problems.
4. Extra charges: There are usually extra charges that need to be paid with the bad credit debt consolidation loan and this may increase the total amount that needs to be paid and the financial burden ultimately.