Debt Consolidation – If you have several small debts and paying all of them off does not sound realistic in the short term.
You may consider a debt consolidation loan which means grouping all your old loans into one big piece. And make reorganizing -repaying your debt easier, faster and more convenient.
Debt Consolidation Loans
Debt consolidation means replacing your previous smaller debts from credit cards, high-interest loans and other bills with a new bigger one. If you are struggling with multiple debts, instead of making many payments with different terms and interest rates, combining your debts into a single, lower-interest loan and making one monthly payment would be a better option.
As an advantage, since now you have only one certain debt to pay off, you would get a lower interest rate.
How to Apply for Debt Consolidation Loans?
You may either find a debt consolidation company which pays off your previous loans. Sets you up with a new payment plan. Including different terms and a more affordable interest rate. Or find a lender and receive a loan to repay your current loans.
There are two main ways to consolidate your old debts:
- Firstly, you may get a 0% interest balance-transfer credit card. Transfer all of your previous debts to pay in a certain time called promotional period. It generally takes 12 to 24 months without being charged interest. But, you should remember the fact that after that period, you will get the usual interest rate.
- Secondly, you may choose to get a debt consolidation loan and pay off your old debt with that money with lower interest rates in installments.
Consolidation For Bad Credit
If you have a low credit score, you may not be able to get a balance transfer credit card. Also can not qualify for a personal loan with low interest rates. Since the main purpose of debt consolidation is reducing the interest rate, receiving a loan with a high interest rate would not make a sense.
So, you may consider alternative options to consolidate your debt with bad credit. This are such as debt management plan, home equity loan, HELOC, cash-out refinance, debt settlement, bankruptcy, 401(k) loan, etc.