Benefits Of Bad Debt Consolidation

If paying off your monthly bills has become a challenge, you might want to combine all your liabilities into a single monthly payment. Bad debt consolidation can do this for you. It lowers your monthly payments and involves repaying only one loan instead of a lot of bills. This way, you get to repay all outstanding debts.

This can be achieved by applying for a new loan that will pay off all you debts for credit cards and other loans. This usually involves higher interest payments (and sometimes lower interest rates depending on your type of debt) with affordable installments each month. This will be advantageous if you cannot repay all your bills on time to various creditors and credit card companies.

Personal loans tend to be lower than credit card interest rates, so doing a debt consolidation could save you hundreds or possibly thousands of dollars in interest.

You will find out that there are some drawbacks and benefits to this method of repaying debts. Your loan can involve putting up collateral such as a house to lower your interest rates. You can also take out a loan without collateral but you should expect to pay higher interest payments. This lets you avoid risking your house to foreclosure.

This offers a great way to resolve your debt woes since consolidating loans usually incur lower interest rates than credit cards. You can bring down your interest rates some more by providing collateral like a vehicle. This allows you to make your monthly bills cheaper and easier to repay. You can clear all your debts with one easy payment.

This method can help you keep your credit history intact because all your loans and bills will be repaid on time by your consolidation lender. You can avoid going into default that can ruin your credit. If you repay your loan each month, you may even be able to improve your credit ranking. This is advantageous to everyone involved.

Before committing to a consolidation, do the math and compare your monthly payments and interest rates between your old bills and the consolidation loan. Will the payments be more affordable for you? Will this debt resolution process be more comfortable and more effective for you than trying to handle it on your own? Take a well-rounded view and consider all the pros & cons as it relates to your particular situation.

As you wait for the approval of your bad debt consolidation loan, you will have to keep paying your old bills. If you fail to repay the bills before your consolidation loan comes through, you will go into default and destroy your credit history. Bad debt consolidation is a good way to solve your financial problems while not further damaging your credit score – and possibly even improving it in the process.

28 Replies to “Benefits Of Bad Debt Consolidation”

  1. This is a great article on debt consolidation, especially for a young person who is just starting to gain financial independence. Would debt consolidation be an option or recommended for someone with smaller, still manageable debts?

    1. If you’re not having problems managing your debt, then you don’t need it. As the saying goes “If it ain’t broke don’t fix it!”

  2. I think Bad Debt Consolidation could help if there’s no other choice. My parents have done this for a number of times to be able to send us to school and I can say that somehow doing this is very effective. Now the three of us graduated college.

  3. My main fear with engaging in strategies like this is that I may end up dealing with the wrong kinds of people. If I’m in dire financial straights, what kind of lenders will I be able to approach? Will they be credible ones that I can trust?

    1. Hi Dominic, your concern is very understandable. In a nutshell, like anything else you’ll need to research the reputation of any company that you’re considering doing business with. You can get personal recommendations, read various online reviews about the company, check the BBB as well as with your local Attorney General office to find out if they have an unacceptable amount of complaints, etc. Also, the debt company that you’re considering should be willing to give you a free consultation to learn about your debt situation and how they can help you. This is where you use your gut. If they don’t really seem concerned in understanding your situation, and just want to rush you to sign some contract or charge you upfront before they even lift a finger, then it’s best to avoid companies like this.

      Also, here’s a list of banned debt relief companies by the FTC. This should eliminate a lot of clowns right there.
      https://www.ftc.gov/enforcement/cases-proceedings/banned-mortgage-relief-debt-relief-companies-people

  4. Thank you so much for this article. I had never thought that bills can be paid in just a single time per month! Well, PERSONALLY, I prefer to avoid being in credit as much as possible. If ever I need to be in debt, I will first calculate the expenses that I will incur (i.e. interest rates) before going for that loan. Also, I will do what is advised in the article – calculate first if the i.e. interest rates are lower if I will use the bad debt consolidation before going for it.

  5. I think Bad debts consolidation will really work for people who have numerous small debts from various credit companies incurring interests. This way, there’s only one debt to pay and it will be easier to keep the date of payment in mind although, of course, I agree that one should do the math with his/her interest rates first before applying for a consolidation loan.

  6. It’s actually what im going through, i used a debt consolidation strategy to get out of various and old debts and it actually worked. Its way easier to get rid of one big low interest rate loan than many small loan debts with higher interest rates.

  7. I really am in need of financial assistance and this article is helpful. I hope your company can assist me in clearing my debt.

    1. Hi Aretha, glad you found this article helpful. We’re not a debt consolidation company; we are an informational blog. I would advise you to contact a professional debt counselor in your area. Also you’ll find advertisers on our site who operate debt companies. We are in no way affiliate with those companies, so you should do your due diligence and check them out thoroughly using the advice in this article and other content that we provide on our site.

  8. this is the good debt management strategy to help those in need. It tells you the benefits of debt consiladation and the disadvantages of it. i really can manage my debt well.

  9. Collateral, It immediately caught my attention. The articles says that it only needed to lower interest rate. So if I don’t have any, I’d have to pay higher interest rate. How big is the difference? can it be lower than my old bill?

    Great article by the way, with additional service such as simple financial consulting, it’ll help many people manage their debt, and so does their life.

    1. Hi Sara, thank you for stopping by. Interest rates will vary and depends on the debt resolution company that you go through, but yes, unsecured loans are always places more for lenders and therefore you would be prone to higher interest. However, depending on your debt, yes it could be lower than your current bill(s). That the whole idea of debt consolidation, to make the payments more convenient so that you can pay off your debt comfortably. Any debt consolidation company that you’re considering should provide you with a free consultation or information by phone or in person to discuss these interest rates and other details.

  10. Debt consolidation should be the last resort for anyone wanting to pay off his or her debt and come out with the least damage in credit. After all, this will only significantly help you if you have a large amount of assets. The fact that your situation has gotten so bad as to warrant debt consolidation likely means that you don’t have that kind of asset at all (or anymore!).

    1. Hi Valerie, I would have to say that bankruptcy should be a last resort, not debt consolidation. Because actually, debt consolidation is structured in such a way that it enables you to not abandon or “walk away” from your debt, it simply reorganizes it “consolidates” it into one convenient loan so that you can finally pay it off – without adding further damage to your credit. And you do not need a large amount of assets to do a debt consolidation; that’s not a requirement and the process works the same with or without collateral. The only difference is that you may be subject to a higher interest rate with an unsecured debt consolidation loan.

  11. This was extremely helpful as it offers a way around all those interest rates from many small loans to build up. Although I must admit this may be difficult for some college students who do not yet own a house or even a car as they have nothing to offer as collateral.

  12. This is a good debt management strategy however to lower the interest rate, one should have a significant collateral. Now this is disadvantageous and quite risky for those who have no collateral, such as a house, to offer.

  13. “It lowers your monthly payments and involves repaying only one loan instead of a lot of bills.” This is definitely a game changer if you ask me. Although, before getting myself in to any of this, I think I need to learn how to manage my expenses better. A very good and helpful read though. Thank you!

  14. This is a great advice for getting rid of outstanding debt. I particularly liked that it didn’t just focus on the positive, but also pointed out the drawbacks to bad debt consolidation.

  15. “You can clear all your debts with one easy payment.” Bad debt consolidation could provide a hassle-free way of settling all your obligations. Though, still needs to consider the disadvantages, it offers a lot of advantages just like proper accounting of your personal fund , which is very necessary nowadays given how fast and expensive living is. Thank you for this, DebtGuru.

  16. I must admit that the title “bad debt consolidation” almost threw me off, but I’m glad I read on. I have missed payments for my debts here and there, but with this method it’d be easier to keep them in check and the possibility of getting lower interests rate is a bonus. Would definitely heed your advice and balance the pros and cons of this with my existing debts before consolidating though.

  17. The second paragraph really caught my attention, it tells the main benefits of bad debt consolidation, this paragraph really informed the advantages. The 2nd to the last paragraph is a good point, since before committing consolidation we should always check the new interest rates, anyway this article really helps people.

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