Debt Consolidation with Bad Credit: Is It A Good Solution for You?
Debt consolidation is one of the primary ways in which you can take control of your debt and manage it more efficiently. This applies particularly if you have more than one balance you’re paying interest on. By transferring your outstanding balances into one account, you can actually attempt to reduce your debt by making a single, large repayment, as opposed to several.
While it’s true that the lending criteria for debt consolidation loans are a tad restrictive concerning the requirements, there are still some lenders who offer these loans to Aussies struggling with bad credit.
Defining a Bad Credit Debt Consolidation Loan
Simply put, debt consolidation refers to the process of incorporating your separate balances into one loan. Typically, you may choose to consolidate a car loan, personal loan or credit card debt.
From that point onward, the lender will be responsible for making repayments on your behalf. Depending on your financial situation, you might be required to utilise the loan funds to cover existing loans or to close some accounts.
Can I Get a Debt Consolidation Loan with Bad Credit?
As we said before, this is a possibility. Still, you don’t have many options if your credit rating is poor.
- Get an Unsecured Personal Loan from a Specialist Lender: To start with, there are numerous specialist lenders that supply large, unsecured loans to people with bad credit. Still, you should note that the interest rates on these loans can be exceedingly high in comparison to conventional loans. Even so, if your outstanding debt makes it challenging for you to manage financially, you could still diminish the total amount you are paying. As a general rule, though, it’s best to shop around before agreeing to any loan terms.
- Factor in the Part 9 Debt Agreement: Debt agreements are, in one way or another, a form of bankruptcy. Nevertheless, if you have large debt you are financially unable to repay, this could be your only option. What does the process imply? It means that the financier will take on the responsibility of negotiating with lenders on your behalf so that your debts don’t accumulate further interest. Worth noting, though, is that this will remain listed on your credit file for five years, which could prevent you from having your loan or credit card applications approved.
What Are the Pros of Bad Credit Debt Consolidation?
- Managing Repayments is Easier: Obviously, the first benefit to debt consolidation is that, instead of making numerous repayments on various balances, you make only one sizeable payment. In this way, you reduce the likelihood of missing payments.
- You could enhance your Financial Standing: Consolidating your debt may provide you utter control of your finances, which might further allow you to become more responsible when it comes to spending and budgeting.
- Save Money: Loans and credit cards are accompanied by numerous fees. Since you won’t be paying separate fees for each balance, you’ll manage to save money, over the course of time.
- Minimise Interest: One of the primary expenses associated with taking out a loan is the interest rate. The good thing about consolidating your debt is that you may negotiate for more favourable loan terms; hence, minimise the money you pay on interest.
Is Debt Consolidation the Right Solution for Me?
While it could be the right solution for many a people, not everyone who applies for a debt consolidation loan will imminently enhance his/her financial situation. That being said, the sensible thing to do is to thoroughly analyse your scenario, unless you want to worsen your debt. Here’s what you should consider:
- Evaluate your Budget: Before taking out a loan it makes sense to ensure that you can manage to make To that end, you should assess whether you can budget for the repayments so that you don’t end up aggravating your debt.
- Lower your Interest: Needless to say, the main point to getting a debt consolidation loan is that you may negotiate a lower interest rate. Still, make sure you actually save on interest rate. Taking out a loan that doesn’t enhance your financial situation in any way doesn’t make sense.
- Compare Different Loan Products: Before filing your loan applications, you should do plenty of research. Determine what loan products are available to you while considering your individual specifications. In this way, you can rest assured you’re getting a competitive interest rate and loan terms.
- Seek Expert Guidance: If your outstanding debt is considerably large, perhaps it would be a good idea to seek financial counselling.
Although it’s safe to say that debt consolidation could help one to better manage debt, it isn’t the best solution for every Aussie. That’s why you should assess whether you’ll actually save money on interest and additional fees if you do go down this path. And, of course, choosing a specialised, reliable lender you can depend on is an important aspect you shouldn’t overlook. Visit our site and get a quote today!