Best Debt Consolidation Loans for Bad Credit

We take loans for business and personal purposes, but due to various financial problems not are able to repay on time. To handle this situation you should know, which the best debt consolidation loans for bad credit.

We take a new loan to repay the old one. In this way we take multiple loans, but because of inability to pay them we are covered under the debt trap.

Multiple loans mean multiple EMI resulting in more stress and one day comes when we feel overdue in worse situations because of handling multiple loans.

So instead of going for multiple loans to repay the old one, it is best to go for debt consolidation loans for bad credit.


    What is the meaning of debt consolidation loans?

    It means consolidating all the older loans into one loan. In this, instead of paying multiple EMIs of multiple loans you have to pay one EMI of only one loan.

    Banks provide this facility for converting your older loan into one that results in a lesser interest rate which will save your money.

    In this way you are able to pay your monthly payment in time.


    What are the best debt consolidation loans for bad credit?

    Here are some of the best ways to debt consolidation loans for your bad credit


    1. Loan against property

    One of the best ways to consolidate debt is to take a Loan by mortgage of property.

    If you have the property and you want to consolidate multiple loans or credit cards loans then you can consolidate your loan into one loan by mortgage your properties. This offers less interest rate than earlier.

    2. Personal loans

    Another option is to consolidate earlier credit cards into personal loans of less interest.

    Personal loan received on the basis of history of your credit card. You can go to the bank and exercises option of converting a loan into one i.e.  Personal loan.


    3. Conversion of credit card due into EMIs

    Sometime you make multiple purchases using a credit card but later you feel that you are not able to pay the amount to the bank.

    So in this case you can ask your bank to convert the amount payable on credit cards due into EMI. Bank makes installments of all purchases in one loan.


    What are the advantages of debt consolidation loans?


    Less interest rate

    Debt consolidation loans for bad credit offers conversion of multiple loans into one and you should choose that way of consolidation which suits your financial conditions.

    Generally debt consolidation is made for consolidating higher interest loans into low interest loans.


    Pay to single creditor

    Instead of paying various creditors it is better to make payment to a single creditor.

    So, the debt consolidation office makes a single monthly payment to the bank instead of multiple payments for multiple loans.


    Reduce your stress

    By debit consolidating you have to pay a single payment in a month, which is easy to handle instead of multiple installments. This makes life easy and you can pay the loan easily.


    Long period of Loan

    In debt consolidation your period of loan payment is extended. You can make payments easily in long periods


    Lower monthly EMI

    If the period of your loan is long your monthly installment gets reduced. You can easily handle small EMI in long run.


    What are the disadvantages of debt consolidation loans for bad credit?


    Long period interest

    Your monthly installment gets reduced in a long period but you have to pay more interest for a long period.

    By debt consolidations your monthly payment gets reduced but you have to pay your loan for a longer period and also interest for that period.

    Debt trap to higher spending

    Even debt consolidation will not help you if you are not changing your spending habits.

    Surely you can save money by debit consolidation like saving of interest. But you don't change your spending habits.

    These are saving when used and you can even say that you are now also not able to pay your monthly installment even if they are less than earlier.


    What is the effect of debt consolidation loans on CIBIL score?


    Positive effects

    • If you are continuously paying your installment your credit score will grow.
    • Debt consolidation into personal loans can improve credit score by lowering credit utilization.
    • It helps you to build a habit of less spending which will result in saving money.
    • You can use to pay your installment on time resulting in improving credit score.


    Negative effects

    • Short term effects can be like the Bank making an inquiry before giving a loan.
    • New loans seem to be new risks which lower credit score for the short term.
    • Drop of credit score if you are not able to make payment of loan debt consolidation loan.

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