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Debt and having bad credit can work in tandem to make your life much harder than necessary. A debt consolidation loan is one way for people to kill the birds of debt and bad credit with one stone. With that in mind, here are some things you should consider about getting a debt consolidation loan with bad credit.
Will Consolidating Your Debt Allow You to Repay It?
This is the first question you should ask yourself when considering the merits of a debt consolidation loan. Your ultimate goal with consolidation is to allow yourself some leeway in paying off unsecured debts. If this isn’t realistic, you might want to think twice before jumping into anything.
All forms of debt relief are supposed to provide consumers a way to get control of their finances. While this is all fine and good in concept, things tend to change when the rubber hits the road. Everyone wants to get out of debt. There’s nothing controversial about that statement. Even people holding what are considered good forms of debt would rather not be paying that loan.
While unsecured loans, such as credit card accounts are universally considered bad debt — meaning you want to pay it off as soon as possible to avoid a pileup of interest — you still need to take an honest look at your situation.
If you don’t think a consolidation loan will be what it takes for you to regain control of your debt, don’t bother with it. You’re wasting your time and might end up in an even worse situation. But if you truly think you can be successful with debt consolidation, it can be an affordable way to beat your debt.
What Caused Your Bad Credit?
The origin of your bad credit might help you decide whether a consolidation loan is a right move. For instance, someone who temporarily has poor credit because of circumstances out of their control might benefit from loans for debt consolidation for bad credit.
People who ran into some kind of unexpected difficulty, but have a general history of paying their bills, can potentially benefit from this type of program.
The opposite is true, however, for someone who has notorious credit issues. If you have bad credit because you have spending issues or something else that continually keeps you from making payments, consolidation might not really help you.
A consolidation loan is a great path out of debt for people who believe in their ability to completely pay it off. This can improve your credit rating in the long run because your payment history accounts for about 35 percent of your FICO score.
However, while you can improve your score with success, you can just as easily hurt it by not making payments.
What Are Your Other Options?
No two people have the exact same financial situation. What works well for one person might not work at all for you. Talking to a credit counselor is a good place to start when learning about the pros and cons of consolidation loans, as well as other paths to consider.
The main options besides a consolidation loan of some form — be it through a debt management plan or credit card balance transfer — are debt settlement and bankruptcy. Both of these are more intense routes for people who need stronger relief than consolidation. There are many nuances to both of these choices, which makes talking to an expert — either through a credit counseling or debt relief agency — a good idea.
Are You Willing to Make Changes to Beat This Debt?
Getting out of debt isn’t a given. At the end of the day, it’s only going to happen when you put in the work. This is especially true for people who ended up with debt and bad credit due to living beyond their means.
Consolidation is only going to be successful if you commit to it. This means sticking to your plan, paying your bills, and not letting yourself slip back into old habits. If you’re serious about beating debt once and for all, you need to approach it with this kind of mindset.