We all know how damaging the credit card can be to out financial position if it is not properly managed. But when the damage is already done, what solution is there? The good news is that with a debt consolidation loan, dealing with this kind of debt can be done more quickly and efficiently.
It is difficult to criticize anyone that has found themselves deep in debt as a direct result of their credit card usage. The truth is that it is all too easy to be overwhelmed by them. And given that, the average American has three-four cards to their name, with a combined balance of some $50,000.
Simply put, clearing credit card debt can be extremely difficult. Of course, those already with credit card troubles are hardly considered excellent credit borrowers. So, when it comes to applying for a debt consolidation loan with bad credit, can the terms available make the deal as effective as we would like to think? The simple answer is Yes! Consolidation might solve the problems.
You might wonder how we can be so certain that debt consolidation loans are an effective solution to the problems created by credit card debt. Well, the fact is that with such a loan, the entire debt can be cleared in one go. After all, consolidation means gathering the separate elements together to create a stronger position.
When it comes to clearing credit card debt, this is really the only way to go. Interest rates can be as high as 22% so when payment is missed, the missed payment fee combined with the interest can very quickly become too much to handle. In fact, a $50,000 debt can increase by as much as $1,000 each month.
Even when securing a debt consolidation loan with bad credit, the loan sum is enough to clear all of the card balances and because of the interest rate is smaller, and the loan term is longer, the size of the required monthly repayment is much lower than the combined minimum repayment sums. So, savings are made too.
It might seem that having a poor credit rating is a debilitating factor when it comes to getting a debt consolidation loan, but in fact, the rating has little influence over the application at all. Bad credit is generally ignored. For a start, this kind of loan is designed to help those with poor credit scores, so the approval is likely, anyway.
Lenders are interested in affordability rather than any score on a credit report because the score itself only represents the credit history of the applicant, not their current ability to make repayments on time. Also, clearing credit card debt is dependent on them being able to make the required payments on time.
But how is affordability established? Well, when applying for a debt consolidation loan with bad credit, the lender needs to be sure that a means to repay exists. This means that the applicant must be in full-time employment and that they have an adequate excess income to meet the repayments.
So now that the advantages of using a debt consolidation loan are clear, a question raises. Where can the loan be secured from? There are two choices: either go to a loan provider or go to a specialized consolidation company.
The loan provider is ideal when the overall debt is low, perhaps not reaching anything more than $25,000. Larger loans can also be secured through a loan provider, but the debtor must acknowledge that the responsibility for repaying the loan falls on their shoulders completely. The best of these lenders are found online, especially when seeking a debt consolidation loan with bad credit. However, a consolidation company is best when the debt involved is high or extremely high, over $25,000-$30,000.
As a conclusion, clearing credit card debt is a challenge and requires discipline and a financial entity such as a loan provider or a company to take control of your finances, ensuring that a strict budget is stuck to.