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.