Is debt consolidation a better option?
Yes, if you are struggling with multiple debts, then debt consolidation might be a better option. We understand that so many monthly repayments, huge interest rates, and on-time loan payments make the finances assembly out of control.
Plus, if you can’t make the payment of your debt, this could negatively affect your credit score. As a result, it becomes more difficult for you to apply for new credit. To escape from such types of situations, a debt consolidation loan is like a safeguard.
Even, a debt consolidation loan might be a perfect option for individuals whose credit score is bad. They can easily control and manage their debts by consolidating them.
What is a debt consolidation loan?
It is simple, if you have lots of debts and struggling to keep up the repayments on the due date, you can merge them all into one loan at lower monthly payments. This phenomenon is known as debt consolidation.
You can merge all your pending debts into one, and in easy to manage a new loan. It clearly means that no tension to manage multiple lenders and payments. In this way, you can better manage your debt without ruining your entire finances. By opting for debt consolidation, you will need to pay only a single monthly payment, so you can pay all your debts without risk of hurting your credit score.
If you find that a debt consolidation loan could help you, then you can apply directly for online debt consolidation loans in Canada through Whizz™. It is easy and 100% free to apply. Just fill out the application form with the amount that you need to borrow to consolidate your debts and the rest we will take care of.
What are the types of debt consolidation loan?
There mainly two types of debt consolidation loans are available:
- Secured: Secured debt consolidation loan means that you have to submit something valuable assets against your loan, e.g. your home. In the future, if you missed the repayments, there are chances that you could lose your home or the asset that you secured. So, make sure to maintain the loan payment on the due date.
- Unsecured: It is reverse of secured form and with unsecured debt consolidation loans, you don’t need to secure something to borrow money. The interest rates of unsecured loans are usually on the higher side.
Can I get a debt consolidation loan with bad credit?
In a nutshell, yes! Debt consolidation loans for bad credit individuals work the same as normal debt consolidation loans. Several lenders offer guaranteed debt consolidation loans for bad credit in Canada to those people who are rejected for other forms of credit.
Bad credit debt consolidation loans work in the same way, merge all debts into one, take a new loan, and pay off all your existing debts. The benefit of a debt consolidation loan is that you can get a new loan at lower interest rates than your older one, and could save some money.
The only difference is that lenders are willing to offer you a consolidation loan even if you carry a bad credit score. But keep in mind is having a bad credit profile usually leads you to pay higher interest rates and it may also limit your borrowing capacity.
Can you get a bad credit debt consolidation loan without a guarantor?
Yes, you don’t need a guarantor to apply for a debt consolidation loan for bad credit. But if your credit is “too poor” then adding a guarantor is a good step.
To do this, all you need is to convince your family member, or friend to be your guarantor. It can be someone in your life with a stronger financial background that agrees to make payment of your loan. It means that if you can’t make repayment of your loan, your guarantor will be responsible to pay it out.
Attaching a guarantor with you makes lenders more confident to accept your application for a debt consolidation loan.
What to consider when consolidating debt with bad credit?
There are several things that to be consider when apply for debt consolidation loan, but the most important points are mentioned below:
Does consolidating debt affect credit score?
Yes, consolidating your debt can indeed impact your credit score. However, once you regularly paying-off your debts, some positive benefits can pump your credit score.
- Your credit utilization ratio starts improving: When you get a debt consolidation loan and start paying off your debts, this act leads to improving your credit utilization. The credit utilization ratio is something like an indicator that shows how much available credit you have. When you repay your loan with no delay, your ratio starts decreasing. It helps to improve your credit score also.
- Easy to manage payment: By consolidating your debt, you can pay off your debts taken from multiple lenders, thus decreasing the number of accounts named on you. Moreover, it becomes easy to manage your finances when having one creditor to repay.
- Make your payment history good: You can borrow the money from a debt consolidation loan as per the ratio of your debts. This gives you the option to pay off your all pending debts on time which improve your payment history and build a good image in front of creditors.
Debt consolidation might indeed hurt your credit score, but if you manage it effectively it gives positive benefits. It shows the creditors that you are taking steps to manage your finances and try to reduce your debts. Paying debts on the due date helps your credit score to improve.
Can debt consolidation save you money?
Yes, debt consolidation loans are offered at lower interest rates, which saves money. Consolidation helps you pay off all your debts quickly and in a much more managed way. Even if you have adverse credit, still you have a chance to apply for debt consolidation loans with bad credit.
But keep in mind that debt consolidation does not always mean that you can save money in the long run. In most cases, you can achieve lower monthly payments, but your debt is spread over a longer period, which causes you to pay more interest.
What are the pros and cons of debt consolidation loans for bad credit?
Debt Consolidation Loan Pros:
- Easy to manage budget:By opting debt consolidation loan, instead of worrying about the payment of your debts every month, now there’s only one! When you consolidate debt, you are in a much better position to control and manage your budget for your single new repayment.
- Can improve credit score:Debt consolidation loan makes it easy to meet monthly repayments on the due date. It also safeguards you from missing any payments at all. Resultant, you could improve your credit score and protect it from more damage.
Debt Consolidation Loan Cons:
- Not for everyone:Yes, it is true that debt consolidation is the best option, but may not mean it for everyone. It might be difficult for people with poor credit to get such loans on the first try. Most lenders are not willing to lend credit to those individuals whose credit history is bad.
- You may pay more in interest overall:There is no guarantee that you get a debt consolidation loan at a lower interest rate, and you might pay back more. But if the interest rates are low, debt consolidation is a worthy option to make regular payments and avoid payment default.
What alternatives are there to consolidation loans for bad credit?
Debt consolidation for bad credit is good option, but if you can’t get bad credit consolidation loan, there are some alternative below:
- 0% balance transfer credit card: A balance transfer credit card is a special design credit card that can transfer the outstanding balance from one or more other credit cards. The balance transfer card comes with a low, or 0% interest charge on the transferred debt for a set period usually 6-12 months. Such credit cards allow you to pay off what you owe without indulging in interest building.
- Home equity line of credit (HELOC): These loans are similar to home equity loans that allow you to borrow money as per your requirements and then pay it back at a variable interest. HELOCs are the best option for those people who need low-interest loans or need more time to pay off their existing debts.
- Debt Settlement: Debt settlement is the step-by-step procedure of negotiating with your lender to pay a lower amount of your loan. This reduces your repayment and finalizes into single settlement payment of your overall debt. You can negotiate with your lender yourself, or hire a debt settlement firm on your behalf.
If you’re struggling with debt… BEWARE!
At any time, if you feel that your debts are becoming unmanageable, talk directly to your lender as soon as possible and discuss your situation. You might negotiate with your lender for lower payments over a longer time.
If you’re having trouble paying back your debt or keeping up with your payments, you may want to talk to a credit counselor. Click Here!
David secures his degree in Communication from Loyola University, Chicago. He loves to discuss through his passion of professional on fashion, finance and TV. He is a coffee lover.
📧: david.argy@whizzpaydayloans.ca
