How to Get Loan Consolidation with Bad Credit
When you have large amounts of debt, it can seem like you keep making more and more payments without ever making any real progress towards getting your debts repaid. You may even forget a payment here and there, which can add even more to your debt through missed payment fees and penalties. In some cases, debt consolidation may be the right solution for you. Here’s how to do it:
1. Evaluate Your Options
Before entering into a debt consolidation agreement, it is important to take the time to evaluate all of your options. When you have bad credit, your loan consolidation options are likely to be limited, so it is even more crucial that you watch out for predatory lending practices that could leave you even worse off than when you started. Look for things like high interest rates, monthly account maintenance fees or early repayment penalties. It is typically best to try to obtain a debt consolidation loan through a bank rather than through a private lender for your safety. Always be sure to get everything in writing and don’t sign any agreement until you fully understand the details.
2. Consider the Impact on Your Credit Rating
While a debt consolidation loan can help you get out of debt, it is important to note that taking out a new loan may temporarily harm your credit rating, due to the additional inquiry on your credit report and the presence of a new, younger account. However, if you are diligent about making your repayments and not taking on any additional debt, your efforts will pay off in the long run.
3. Understand the Repayment Structure
While debt consolidation can reduce your monthly repayment amount, it can often end up costing you more in interest in the long run if it takes you longer to pay off the loan. Take the time to run through the calculations or to have a banker or financial advisor do it for you. Your goal here is to get your debt paid off faster and to pay less interest, not more.
4. Consider Your Personal Habits
When you take out a debt consolidation loan, you’ll be able to immediately pay off your credit cards. For many people, this zero balance can lead to the temptation to go out and spend that newfound money. However, this is a very dangerous trap, as you will only be adding to the amount of debt that you are trying to pay off. If you worry about your self-control when it comes to spending, debt consolidation may not be a good option for you.