If you find that you have more debt than you can handle, and that it’s nearly impossible to keep up on your monthly payments, then a debt consolidation loan may be the solution you have been looking for.
A debt consolidation loan is a loan that you take out from a financial institution to pay off other creditors. The advantage of having one loan to make payments on can end up saving you quite a bit of money in interest, and it can also make your debt less emotionally taxing on you.
Unfortunately, many people that find themselves in heavy debt also end up having bad credit due to being late on payments and other factors. This can make getting a loan very challenging, and many people end up giving up since they feel as if they won’t ever be able to qualify for a loan.
The good news is that there are bad credit loans available that can help you if you find yourself in need of some financial relief. By taking the time to learn about these types of loans you can help to get your debt under control.
What To Expect When Looking At Bad Credit Loans
Once you make the decision to try to find a debt consolidation loan there are a few things you need to keep in mind especially if you don’t have the best credit.
The first thing you need to keep in mind is that you will likely being paying a higher interest rate on your loan that you may expect. While paying a higher interest rate isn’t ideal, in this situation it may be your best option. Banks and other financial institutions make decisions about the interest rates they will charge based upon your credit score. If you have good credit you aren’t considered as much of a risk, so you pay a lower interest rate.
On the other hand if you have bad credit you will pay a higher interest rate since you are considered more of a risk. When shopping around for bad credit loans make sure that you find the best interest rate that you can. While you will be paying a higher rate than you may like taking the time to find the best offer can still save you quite a bit of money.
When looking at the rates and terms on bad credit loans many people make the mistake of not taking advantage of them since they feel that the terms aren’t favorable. If you find yourself in this situation you should take a moment to think about the advantages of getting a debt consolidation loan before you decide against doing it.
A debt consolidation loan can help you to start on the path to being financially secure once again. By paying off high interest rate credit cards and other creditors you can actually help to improve your credit score. When this happens you always have the option of trying to get a more favorable interest rate by refinancing your current loan, or applying for a new loan.
On top of that the mental stress that comes from dealing with creditors and having to make multiple monthly payments will be alleviated once you use your loan to pay them off. It’s also much easier to manage one monthly payment than it is to manage multiple payments with multiple creditors. So make sure that you take your time and make an intelligent decision about any loans you are considering. When used the right way even higher interest loans can be a great benefit to you.
Why Bad Credit Loans Are Better Than Payday Loans
If you have bad credit you may be tempted to try to secure a loan from a lender that doesn’t use credit as a deciding factor. In most cases this type of lender would be a payday loan business. Payday loans can be a tempting option because they don’t check your credit. Instead of using credit to make a decision they simply need you to have a checking account in good standing as well as a steady job.
Unfortunately there are several problems with this type of loan, and that’s why they should be avoided. The first problem is that they charge a very high interest rate, a rate that is far higher than any more traditional loan would charge. This means that you are paying out a lot more on your loan, which is never a good things.
The second major problem with payday loans is that they are short term loans. In most cases this type of loan is only for a week or two, or even a month. At the end of the loan period you have to pay back the money you borrowed, which will probably make it difficult for you to meet your other financial obligations. When you can’t pay your bills then you are going to need another loan, which will have you back at the payday loan store taking out another loan, and after that another one. This is how payday loan companies make their money. They get your trapped in a cycle where you can’t afford to not get another payday loan, so you basically end up paying a high interest rate without ever paying off the debt.
The third major reason to avoid payday loan companies is because it won’t help your credit. The idea of paying off debt should be one based upon improving your credit score and working toward a better financial future. With payday loan companies this won’t happen. Not only do they not give you enough in most cases to pay off any significant amount of debt, they also don’t report your payments to any credit reporting agencies.
So if you opt to get a payday loan you won’t be able to pay off the debt you need to, you won’t have a positive impact on your credit score, and you could get trapped into a cycle where you have no choice but to take out a new payday loan on a regular basis.
What Are Your Options For Securing A Debt Consolidation Loan?
Once you decide that getting a debt consolidation loan is the right move for you the next step is to explore your options. It’s important that you take your time and look around before making any final decisions. Spending some time comparing loans can help you to get a more favorable interest rate, and a payment plan that better suits your budget.
When considering loans keep in mind that if you take a shorter term loan your payments may be higher, but your interest rate may be lower. Shorter term loans are generally seen as less of a risk so in many cases you can get a better interest rate by paying your loan off sooner.
However make sure that whatever payments you agree to are affordable for you. The last thing you want to do is to end up falling behind on payments on a debt consolidation loan. This will simply make your initial financial problems worse making it even harder for you to get out of debt.
The first type of bad credit loans that you should consider are loans where you put collateral up as a guarantee that you will make your payments. There are advantages and disadvantages to this type of loan, but in most cases the advantages make it worth it.
The biggest advantage to this type of loan is that you can usually get a lower interest rate when you put up collateral. A lower interest rate means lower payments, which will obviously be beneficial to you as you work to become more financially stable.
On the other hand putting up collateral can be a risk since failing to make your payments can result in you losing whatever you have put at risk when assuming the loan. So if you decide to get a loan and use something of value for collateral it is very important that you keep on your payments.
Another option for getting a better interest rate on bad credit loans is to apply with a cosigner. A cosigner is someone that agrees to assume responsibility for a loan in the event that the person who takes the loan out is unable to meet their obligations. The biggest advantage to this type of loan is also a lower interest rate. Since the person who is cosigning the loan with you needs to have good credit you can usually get a better interest rate than you could if you were taking the loan out yourself.
There are several risks involved in this type of loan that you need to be aware of. The first risk is that you could end up putting a major strain on the relationship with the cosigner if you end up defaulting on the loan. This will make them financially responsible for the loan, and if they can’t cover the loan then their credit will be impacted. If you are interested in taking out a loan with a cosigner make sure that you can make the payments, and that the person you are asking to cosign is in a position financially where they won’t suffer major issues if you do default.
Where Can You Find Out About A Debt Consolidation Loan?
After reviewing the pros and cons of getting a debt consolidation loan you probably are wondering where you can find out about the different option that are out there. The first place you should look is at your bank or credit union. If you have a checking or savings account at a traditional lender then they may be able to help you to get the loan that you need.
While checking with your bank is a good starting point the honest truth is that they likely not be able to help you. Most banks have credit requirements for loans that people with bad credit can’t meet. While your bank will be unlikely to be able to help you skipping checking with them is a mistake. Your bank may be able to show you what you can do to meet their requirements, and if you do you will likely be able to secure a better interest rate than if you went elsewhere.
In the likely event that your bank is unable to help you get the loan you need your next step should be to go online and check out different lenders. The internet makes it easier than ever before to find out information about just about anything, and that includes different lenders that specialize in bad credit loans.
The great thing about looking online is that you can compare rates and payment terms from many different lenders from the comfort of your own home. When you are looking online at different lenders make sure that you carefully read any forms that you are filling out.
Many lenders can do what is known as a soft credit inquiry, this is where they gather basic financial information without having an inquiry show up on your credit report. This is important because an inquiry on your credit report will cause your credit score to drop. While any lender you do business with will have to do a hard credit inquiry before finalizing your loan, this should only be done once you are pretty certain that you want to take a loan out with them.
One of the other benefits of looking at lenders online is that you can quickly and easily find out about their history and how satisfied previous customers have been with their service. Any lender you are considering should have a history of satisfied customers.
If you use a search engine you can pull up customer comments about most lenders without much effort, and these comments should give you an idea of whether or not you want to do business with this company. If you see more than a few complaints then this should be a red flag, and you should consider taking your business elsewhere. Taking a few minutes now to do your homework and find out about a lender can end up saving you a lot of time and aggravation later.
What Bad Credit Loan Companies Should You Look Into?
Once you have spent some time looking at different lenders online you may be having some difficulty in deciding which is your best option. One of the leading online lenders that specializes in helping people with bad credit get loans is Springleaf Financial. They typically offer loans starting at around $1,500 and going all the way up to $10,000. Springleaf charges interest rates that are on the higher side, but that’s to be expected whenever you are dealing with a lender that offers loans to people with bad credit.
You can apply for a loan with Springleaf online and then follow up at one of their many branches. They are a company that has been in business for over 90 years, and they are also accredited with the Better Business Bureau.
Another good option to consider is Avant. Avant is similar to Springleaf in many ways, but they differ in that they offer up to $35,000 on their loans. They also offer flexible repayment plans that can be as little as one year and up to four years. Adding further to their value is the fact that they don’t charge an origination fee. If you want to get a bad credit loan then Avant should be one of the companies that you look closely at.
Once You Have Obtained Your Debt Consolidation Loan Use It To Build Toward A Better Future
Once you have silenced the creditors by using your debt consolidation loan to pay them, the next step is fixing the issues that led to your financial problems in the first place. Chances are that if you have heavy debt issues then you are not managing your money properly.
A lot of people live beyond their means and use credit cards far too frequently. Then before they know it they owe a lot of money and have no way of paying it back. This will end up in having years of high interest credit card payments, and if you can’t make the payments your credit will suffer as a result. So if you have recently used a loan to consolidate your debt the next step is to find ways to prevent further financial problems.
The first thing you should do when planning out your financial future is to create a budget. Right down every expense that you have as well as all income sources. Ideally you should be able to cover all of your expenses and have income left over. If you can’t then you have a problem. When you look at your budget you should think about ways to cut back on expenses.
For example you could get rid of premium cable and just have basic. You could also consider a less expensive cell phone plan. The idea is to find ways that you can save a little money here and there. You will probably be surprised at just how quickly a little bit of savings can make a big difference on your bottom line.
Another thing you should keep in mind is that you don’t necessarily have to stick with the original debt consolidation loan you have taken out. Once you have paid off some creditors your credit score should see a modest improvement. Once you have made several monthly payments on your loan you should also see an improvement in your credit score. This is when you can look at different loan options to see if you can get a more favorable rate. Even if you can’t get a better rate you should work to pay off the loan you took out as quickly as possible. By paying off your loan early you can save yourself a lot of interest over the long term.
After getting your budget in order and paying off creditors it’s also very important that you monitor your credit score. Remember that the steps you are taking now should help you to get a better credit score in the future, and that positive changes can happen within just a few months. You need to monitor your credit report for potential fraud, since you are trying to build better credit you really need to spend a lot of time protecting that credit score. Over time, with your new debt consolidation loan, your credit should improve which will help you to become more financially stable.
Don’t Allow Your Current Situation To Define You
If you are in heavy debt it’s far too easy to allow that debt to be an all consuming and crushing weight that can have a major impact on your life. You may feel as if you are trapped and that bankruptcy is your only option. The most important thing you can do for yourself is to take a breath, relax, and start looking for solutions instead of dwelling on problems.
A lot of people end up in the same situation that you are in right now, and there’s no shame in finding yourself in a challenging financial situation. What you need to do is to recognize what mistakes led you down this path and then resolve to make changes to keep it from happening again.
Next you need to take positive action to help your situation. Instead of feeling sorry for yourself do something about it and look into different debt consolidation loan options that may be able to help you. Remember that getting a loan should be done responsibly and it should be done with a plan to fixing your financial problems.
A loan shouldn’t be used to delay the inevitable, it should be used to open the doorway to a better financial future. Recognizing that you have a problem is the first step in fixing your financial situation. Next comes the hard part, you have to learn to budget, be responsible, and find a debt consolidation loan that will work for you. While the road to a better financial future will be full of challenges, it is a road you must take if you want to live a debt free life.