There are 2 different types of debt consolidation
1 Debt consolidation is when all your debts are bundled into one loan, say for instance you have 3 credit cards all with money owing, you may be better off taking out a personal loan at a lower interest rate and pay out your credit cards which have a higher interest rate.
Another advantage of debt consolidation loan is you may be able to have the loan over period that suits you eg: weekly, fortnightly or monthly. This is just one instance of debt consolidation.
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2 The second type of debt consolidation is a debt agreement where you can negotiate with your lenders, this can be when you are having problems like paying debts, are getting phone calls from creditors and debt collectors, have had vehicles repossessed and left with debt or are facing bankruptcy. The form below will take you to the experts in this field.
Debt Handling - Debt Consolidation - Pros and Cons
Many people find that over time they have accumulated more debt than they can repay. When that happens, there is a reinforcing downward spiral. The inability to repay the debt leads to additional interest charges and penalties, making it still harder to repay the amount owed.
One common suggestion for breaking this vicious circle is to employ debt consolidation. For thousands, this has seemed like the way out, the way back to financial health. But there are pros and cons to debt consolidation, no matter what form it takes. Being aware of those will help you decide if it is the salvation in your particular circumstances.
Bad Credit Loans Debt Consolidation
If you need a loan but have bad credit, you may have trouble finding a lender who will consider loaning to you. If you do find a lender, the loan options that they offer may be somewhat limited and lacking the best rates. Whether you are seeking a car loan, a home mortgage, or an instant loan, almost every lender will first check your credit report. Your credit report is a complete record of your financial history, containing information about your past and current borrowing, employment, any outstanding debts, and much more. It is impossible to prevent lenders from accessing this information. Fortunately, there are some lenders and loan agencies that offer decent loans to individuals with poor credit, if you just know what to search for.
Look for loan agencies that offer debt consolidation services. Debt consolidation involves taking out a single loan that will be used to pay off several other loans. The advantages of debt consolidation may include securing a lower interest rate, a fixed interest rate, or simply the convenience of having just one loan to deal with. You can either consolidate several unsecured loans into a new unsecured loan, or you can consolidate them into a new secured loan against collateral, such as a home. A secured loan with collateral will usually have a lower interest rate than an unsecured loan, because when the lender has the option of foreclosure, or selling the collateral if the borrower defaults, they carry less risk.
If a borrower is close to bankruptcy, a debt consolidation agency may even buy their loans at a discount and pass some of these savings on to the borrower. Such borrowers should keep in mind that debt consolidation may prevent them from discharging their debts in bankruptcy in the future, so they should weigh their decision accordingly. However, for those with bad credit who would rather avoid bankruptcy, debt consolidation can be an excellent way to get a needed loan while paying off their debts.
Debt consolidation is also a good choice for individuals with bad credit due to credit card debt. Credit cards carry high interest rates compared to most other unsecured loans. By consolidating credit card loans into a single secured loan with a house, car, or other property as collateral, these individuals can lock in a much lower interest rate. This decreases the total amount of money owed to the lender, enabling the loan to be paid off more quickly and incur less interest.
Some loan agencies even offer unsecured short-term or long-term loans to individuals with bad credit. These lenders may consider borrowers regardless of their credit history, employment status, or financial situation. Most loan agencies record loan enquiries, which can further hurt an individual's credit rating, particularly if they decide not to take the offered loan. However, some agencies forgo the recording of enquiries. Thanks to the internet, potential borrowers can research and compare the various loan options available to them more quickly and thoroughly than ever before.