You have availed a loan and if you fail in honoring your commitment in the matter of repayment, it is known as bad credit. What happens then? You will carry a ‘bad credit’ tag attached t you. This will have a great impact on your financial standing and you will find things difficult when you want to avail loans in future. However, there is a welcome sign of relief! Despite your having some debts and a somewhat poor credit score, you can still tide over your current financial crisis, with the help of the option called ‘debt consolidation loan.’ This option will enable you to get the interest rates reduced in respect of your various existing loans, which means there is a substantial reduction in the total amount paid by you every month.
How to bring down the debt?
This debt consolidation loan thus helps you in bringing down your total debt amount. Because of your bad history, this option could lead to problems later on. In view of this, you can keep this yahoo.com option as a last resort. However, one who has no other sources and whose credit is bad will certainly opt for this loan though Interest rates are high in this loan. So, one has to keep this factor in mind and has to take this into consideration before taking a final decision in the matter.
Beware of unethical lenders
Many people who need money so badly but are not able to get because of their bad credit, feel grateful to the lenders who are willing to offer them loans. Though they are informed at the beginning itself that the rate of interest will be high, they just do not seem bothered about it. They seem to conveniently overlook the fact that they will be paying more over the period. Perhaps their only thinking is that they are able to get the money they require. Quite naturally, lenders do take advantage of such people and try to ‘extract’ as much as possible from these borrowers. By the time the borrowers realize their folly in availing this loan, it will be too late and nothing could be done!
Loans can help to improve the credit score
Take the case of a person who starts a new venture which has ambitions not only to establish but to expand and grow. When the business has grown it will be in a position to bring in the funds it may require. But in the early stages, when it has to meet various commitments, it will need financial help. This loan could be of help to that person even if he has poor credit. The loan will provide him enough funds to meet his financial obligations. Besides, it will also help him, indirectly, in improving his credit. It enables him to pay back the new loan on time, making the regular monthly payments without fail. All this will lead to his improving his credit score.
Lower interest rates on collateral loans
In the case of home owner and such others who are unable to offer any form of security for getting a loan, could go in for the loan option known as ‘poor or bad history loan.’ In case there is a possibility of offering any collateral, there are a lot of advantages like lower interest rates and convenient and affordable terms. It seems there is a lot of competition among the lenders in offering this loan; and the number of lenders willing to offer this loan, is constantly getting increased. They are willing to give loans to people with very poor credit history, of course at a higher interest rate. If there is a security offered by the borrower, the lenders are prepared to give poor credit loans up to $100,000.