A Basic Guide To Bad Debt Consolidation

If it’s difficult to stretch your income to meet your expenses, a bad debt consolidation loan could help. Payments towards debts such as credit cards, store accounts or bank overdrafts can take a big bite out of your monthly budget. A loan that allows you to pay off all your creditors could result in a lower repayment each month and save you money on interest in the long term.

Consolidating debts is often helpful if you owe large balances on credit cards. The monthly minimum payment typically only covers the accrued interest and will not reduce the balance owed. It makes financial sense to take out a bank loan at a lower interest rate and use it to pay off all your credit cards with higher interest rates.

Bad debt consolidation may also be prudent if you are worried about missing any of your repayments. Taking out a loan with a low monthly payment plan could help to protect your credit rating. If your financial circumstances have already resulted in missed payments, you can rebuild your credit status by paying off a loan with affordable terms.

Before consolidating your debts, examine your finances as a whole and determine how much you could reasonably afford to pay back each month. Add up the balances owed to all your creditors to determine the amount you need to borrow. Note the lowest interest rate you are currently paying and look for a loan that can match or beat it.

Secured loans typically have lower rates of interest than unsecured loans. If you are a home owner, you can usually get better terms by offering your house as collateral. Bear in mind that this is not advisable if your financial future is uncertain. The lender could foreclose on your home in the event of missed payments.

Finance company websites usually provide forms you can fill in online to find out what type of loans are available to you. If you express interest in an offer, the official documents will provided to your for review. After you read, sign and return them, the lender will arrange for the funds to be deposited in your account.

Remember that a bad debt consolidation loan will not erase your debt. However, a loan with a lower interest rate will save you money in the long run. In addition, if your monthly payment is lower than the total of your previous payments, you will have more cash in your account to cover everyday living expenses.

You can learn everything you’ve ever wanted to know about the bad debt consolidation process by calling for a free debt consultation via the number listed at the top right of this site. The longer you wait, the worse things will get.

26 Replies to “A Basic Guide To Bad Debt Consolidation”

  1. It is good advise to get a bad debt consolidation loan if you are worried that you may be unable to make a credit card payment. Credit card bills can fluctuate and catch you by surprise. Having a low monthly payment on a loan would be a better option than finding yourself unable to pay a bill.

  2. Thank you for writing this article and outlining the benefits of debt consolidation. Few sources stress just how important it is to consolidate as soon as possible to prevent paying only the interest and never tackling your debt in the long term.

  3. I think that this might be a good idea for some. However I’m not sure if it would work with medical bills. That’s where most of my debt lies.

  4. This article is a revelation to me. As a student, I used to think that debts are just a temporary solution that are easy to fix and pay on a monthly basis, but I was wrong! This article gave me insights about a bad credit status and how to get out of it, which is such a revelation to me.

  5. A few of my relatives have been some really rough financial patches like these and tackling it this way rather than taking up more loans is such a better idea! This will surely help me on how to make my future choices better.

  6. I am so glad the author touches on how these loans can be helpful to people like me who want an easier way to manage their debt, especially their credit card debt. Credit card debt is really hard to pay off thanks to the ridiculous interest rates, which I still don’t understand the legality of. I might actually take this article’s advice.

  7. My husband and I have been trying to get a loan for a while now but we both have bad credit. We paid off our house and now we would like to fix it up but that takes money, that we don’t have. This is really good information, especially the part about using your house as collateral because we were going to do this. Now I will tell my husband it is not a good idea to do this thanks to this information in this article. Thanks!

  8. In order to do the math correctly, you need to determine what your monthly interest payments are for each individual debt, add them all up, and determine what the monthly interest payment would be on the loan needed to pay off all of the debts. Shop around to find the bank or other institution that will give you the lowest interest rate on your loan. If you have credit card debt, DO THIS IMMEDIATELY, because the rates on credit card debt are outrageous, usually 15% a month. Many people have gone into bankruptcy because they weren’t aware that they could simply get a loan and pay off their credit card debt right away.

  9. It is very important that people understand their options when they are in a terrible financial crisis. Being broke does not have to be the end of your world. Just take a deep breath, and do the research before freaking out.

  10. Debt consolidation was a great answer to my difficulties after my company downsized. I didn’t want to declare bankruptcy and was tired of the high rates of Payday loans to try to get through month to month bills. I was able to get lower monthly payments with debt consolidation so I could get back on my feet.

  11. I got sacked with all the marital debt and now I need to climb my way out. I’m thankful for the guidance provided here on how to get started and what to look out for as I get back on track.

  12. My debt problem isn’t really with credit card debt, but I found this article interesting. I will pass the information along to others who have high credit card debt, and may even use the information provided for the little credit card debt I have. I never thought about it before, but it makes sense: take out a bank loan at a lower interest rate and use it to pay off credit cards with higher interest rates! It also seems less overwhelming to have one payment to make as opposed to many.

  13. Debt consolidation is all about combining all your debts into one debt. You are fighting several debts with another debt here, but with a lower interest and longer payment terms. We had debts in the family but luckily, we never came to the point of having uncontrollable debts to pay due to credit cards. Yes, financial education should really start young. The earlier kids are taught about how to manage their money, the better their financial future will be, without having to resort to unnecessary debts in adulthood.

  14. This article opened my eyes. Too many debt from different loan sources are not good. The author is honest enough to not offer a quick fix, but instead one loan with a lower interest rate is much better.

    1. I would have to agree. One loan with a lower rate is definitely better than multiple loans with various rates that are racking up unmanageable interest fees.

  15. I have been in this situation before where I was not making a dent in paying off my credit cards because of the interests charge. With a lower interest rate, debt consolidation will ultimately help you save money in the long run and relieve you of the financial stress you are facing on a daily basis.

  16. Growing up in a household that did not believe in credit cards, it is easy to understand how people get themselves in trouble by having them. It’s like an ATM machine that you punch in a few numbers and out comes cash! Unfortunately, people need to learn how to live with a budget. Personally I believe this is something that should be taught at the high school level and into college too. That said, debt consolidation is a great idea to help those people get back on track financially and hopefully be able to continue on the path of good financial health!

    1. Yes you are right Deborah. This is something that should be taught at the high school level and into college too. Really makes you wonder why they don’t.

  17. When you’re in a bad situation like severe credit card debt, getting a loan like this can help. A lot of times banks will want to help you out too. I mean it’s better to have someone able to pay you money, right? If you can help it though it’s best to try and avoid needing something like this. Try not to pay more than you have if you can help it. Maybe even switch to a debit card if it’s hard for you to overspend on your credit card.

  18. Depending on the amount of bad debt that someone has, a debt consolidation loan may be the answer. Before taking out a new loan, it is a good idea to add up the balances owed in order to know how much to borrow. Hopefully, this will lower the monthly payment so that there will be money left for living expenses.

  19. A timely and helpful primer on debt consolidation for today’s uncertain economic climate. It’s also written in language that is easy to understand. No one under the stress of having to refinance wants to get bogged down in complicated economic jargon. Maybe most importantly, the author of this article does not offer a false promise of completely eliminating debt with such a loan, but suggests that it is simply a tool to provide some relief.

  20. This is true to help. I’ve gone through this before where there’s too many loan and credit card to pay at the same time. In the end, I took a loan and paid it all up and now I only have to pay 1 loan at a lower monthly rate.

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