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Debt Consolidation

When a person with bad credit considers getting a debt consolidation loan they may hesitate when they notice the interest rate or the repayment amount. However, what they should be looking at are the main benefits they’ll receive by getting the loan. Here are some of the main benefits of getting bad credit loans for debt consolidation.

Lower Interest Rates

A debt consolidation loan for people with bad credit may have a higher interest rate than a traditional loan. However, this rate may still be lower than the interest rates on most credit cards that a person with bad credit would qualify for. Before turning down a loan because of the interest rates consider how they compare to the interest you’re already paying. Using the loan money to pay off high-interest credit card debts will help save money in the long run.

Longer Payment Terms

The terms for a debt consolidation loan can be around three to five years. But some lenders offer longer terms. This allows you to spread out your debt over time. If you have some short-term debts, you can reduce your monthly payments. The longer term means that you are spreading out some of your short-term debt which can free up some of your money.

Lower Monthly Payments

Before you get your debt consolidation loan take a look at the amount of money you pay each month to your creditors. Take the amount of money you pay for the bills that will be paid off by the loan. If the total amount of those monthly payments are lower than the monthly payment for the debt consolidation loan, you should reconsider getting a loan. However, in most cases, this amount will be significantly less because of the longer term and lower interest rates.

Improve Your Credit

After you pay up your credit cards and other debts, your credit report should show an improvement. As long as you keep your credit limits low by closing some accounts and reduce the use of other, you will see an increase in your credit score over time. However, it’s important to make sure that you keep up with your payments. Late or missing payments will have a significant impact on your credit score.

These are just a few of the benefits of getting bad credit loans for debt consolidation. If you feel that you have too many payments and the interest rates are too high, then a debt consolidation loan can help make your finances more manageable while helping to improve your credit.