Bad credit Debt Consolidation Loan

If that is the case with any body then debt consolidation is a perfect tool for those borrowers.

Debt consolidation – debt consolidation is a tool where all the accrued debts of a borrower are all entailed into 1 single debt from one single creditor. Therefore, enabling the borrower to handle his debts correctly.

An example of how to use debt consolidation loans for people is when any borrower has taken loans from 3 or four creditors at different interest credit rates. But now he finds himself in a situation where he’s not able to pay his monthly installments regularly and is not able to manage his debts properly. This is leading to harassment by the creditors. Compounding of money due and therefore higher rates being paid.

The problem becomes even more critical for individuals with bad credit history. It includes people like

• CCJ’s
• Arrears
• Defaults
• Late payments, or
• People who have previously filled for bankruptcy

Bad credit history takes into consideration the people who’ve not payments with the regularity to their borrowers in their previous loan term. On the basis of their regularity they are offered a score to estimate the financial credit worthiness of the borrower. A score of below 600 is considered poor and a score of or above 620 is considered good. You will find other scores as well like FICO (Fair Isaac Corporation) the range of this score is from 300 – 850.

Individuals can get it calculated by different credit rating agencies of the United kingdom specifically Transunion, Equifax or Experian. The score is according to the factors such as: amount of previous loan, length of previous loan, credit period and how the repayment was made. The borrower is given 3 scores and the creditors can either or a combination of these scores.

Debt consolidation to the poor credit people is available in 2 forms i.e. secured debt consolidation where the borrower has to offer collateral to the lenders. As mortgage it could be any worthwhile asset of the borrower such as an automobile or his home. The benefits of secured debt consolidation are that it facilitates low interest rates, simple and flexible repayment plan for a long period as long as up to 25 years. Else they can go for unsecured debt consolidation where no security is necessary to avail the loan. This method is relatively simple and available to every borrower. The relative drawback is that this can be a little expensive compared to secured debt consolidation and may be acquired for a lesser time period.

Even with the unsecured debt consolidation the borrowers can now get the best deals with the presence of a lot of lenders. The competition is intense and the clients get all the benefits.

The advantages of going for bad credit debt consolidation loans are

•  It saves the borrower from the embarrassment that can be put upon him by the creditors.
•  It helps the people with bad credit scores to enhance on their credit score and thereby improving their credit value.
• The amount of amount repayable is paid at an interest rate that is less than what it was previously paid. Hence less load on the borrowers.