Many individuals make the error of taking loans for all the financial requirements that they come across in their lives. For many people it’s a necessity and some people think that they will be able to pay off their debts easily. However, sometimes it isn’t possible for every one to pay of their debts as easily as first thought.
If that is the case with any body then debt consolidation is an ideal tool for those borrowers.
Debt consolidation – debt consolidation is a tool where all of the accumulated debts of a borrower are all entailed into one single debt from one single creditor. Therefore, allowing the borrower to manage his debts properly.
An example of how to use debt consolidation loans for people is when any borrower has taken loans from 3 or 4 creditors at various interest credit rates. But now he finds himself in a situation where he is not able to pay his monthly installments regularly and is not able to manage his debts effectively. This is resulting in harassment by the creditors. Compounding of money due and hence higher rates being paid.
The problem becomes much more serious for individuals with bad credit history. It consists of people like
* Late payments, or
* People who have previously filled for bankruptcy
Bad credit history requires into consideration the individuals who have not payments with the regularity to their borrowers in their previous loan term. On the basis of their regularity they are given a score to estimate the financial credit worthiness of the borrower. A score of below 600 is regarded as poor and a score of or above 620 is considered good. There are other scores as well like FICO (Fair Isaac Corporation) the range of this score is from 300 – 850.
People can get it calculated by different credit rating agencies of the Uk namely Transunion, Equifax or Experian. The score is according to the factors such as: amount of previous loan, length of previous loan, credit period and how the repayment was made. The borrower is given three scores and the creditors can either or a combination of these scores.
Debt consolidation to the poor credit people is available in two forms i.e. secured debt consolidation where the borrower needs to provide collateral to the loan companies. As mortgage it might be any worthwhile asset of the borrower such as an automobile or his house. The benefits of secured debt consolidation are that it facilitates low interest rates, simple and flexible repayment plan for a long period as long as up to 25 years. Else they can go for unsecured debt consolidation where no security is required to avail the loan. This technique is comparatively easy and available to every borrower. The relative disadvantage is that this can be a little costly compared to secured debt consolidation and can be availed for a lesser time period.
Even with the unsecured debt consolidation the borrowers can now get the very best deals with the presence of so many lenders. The competition is extreme and also the clients get all of the advantages.
The advantages of going for bad credit debt consolidation loans are
* It saves the borrower from the humiliation that may be put upon him by the creditors.
* It helps the people with bad credit scores to improve on their credit score and thus enhancing their credit worthiness.
* The amount of amount repayable is paid at an interest rate which is less than what it was formerly paid. Hence less burden on the borrowers.
Debt consolidation can be very critical in helping individuals with bad credit and even those who have normal credit. It not just serves the purpose but if need be can be very helpful in other ways as well. So all the people who find themselves in a similar condition ought to think about going for a debt consolidation loan.
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