Poor Credit Debt Consolidation Loans
by: Rebecca Game
Poor credit debt consolidation loans are an
excellent option to consider if you are an individual who wouldn't qualify
for a traditional loan, but are in need of money to pay off bills, consolidate
debt into one lower payment, and improve your style of living.
Understanding the exact meaning of a poor credit
debt consolidation loan is extremely important. Poor credit debt consolidation
loans are meant with individuals that have low credit report scores, as rated
by Experian.com, Transunion.com, and Equifax.com These three credit bureaus
are where lenders turn to prior to offering a loan to a business or individual.
Lenders obtain an individual's credit scores to determine if the person is
worthy of the loan. Scores listed through the three credit bureaus are configured
and calculated using software by the Fair Isaac Company, and are called FICO
scores. The FICO scores range between 300, for no credit, and 850, for perfect
credit.
Virtually no one has perfect credit scores at
850, because scores are based on a number of factors, including debt to income
ratio and late payments, to name a few. However, scores of less than 619
are considered poor credit, and scores below 550 make it virtually impossible
to obtain a loan except in certain instances where a lender specializes in
poor credit debt consolidation loans and is looking for such borrowers. In
general, though, scores below 619 are considered poor credit, and the borrower
is considered a high risk to the lender.
|
Having poor credit is difficult, and it's not ideal
by any means, but it also doesn't have to be something that lasts forever.
Credit scores need not rule out the options a loan can offer. Relief can
come with obtaining a poor credit debt consolidation loan. While it does
take time, credit scores can definitely be repaired after obtaining a poor
credit debt consolidation loan.
When conventional loans are out of the picture
due to low credit scores, a poor credit debt consolidation loan can offer
a way out of having poor credit, and a way of repairing credit scores and
creating a better lifestyle. Poor credit debt consolidation loans can come
at a time when the borrower needs money the most - when payments are high,
or when income levels aren't high enough to pay all of the bills. They are
available to even those that are self-employed or have been involved in a
bankruptcy more than ten years ago. Additionally, a poor credit debt
consolidation loan offers a "light at the end of the tunnel" for repaying
debt faster, as well as consolidating all bills into one smaller monthly
payment. By making these payments on time, credit scores can jump as much
as 100 points or more in one year.
|
Pros of Poor Credit
Debt Consolidation Loans
1. Poor credit debt consolidation loans put
money into the hands of an individual who wouldn't otherwise qualify for
a loan.
2. These types of loans give borrowers a chance
to consolidate their debts and gain control over their financial state, as
well as an opportunity to invest in a home or automobile if needed.
3. Poor credit debt consolidation loans allow
individuals to borrow money without giving a reason, and therefore, can be
used for any purpose, including a college education or a business.
4. A poor credit debt consolidation can allow
the borrower a way to improve their credit rating, provided that all payments
are made on time.
5. There is an emotional and psychological impact
involved with poor credit debt consolidation loans. It gives individuals
an opportunity to turn their life around and improve it when they previously
felt that it was hopeless. Poor credit debt consolidation loans can also
help individuals stay out of bankruptcy.
|
Cons of Poor Credit Debt Consolidation Loans
1. The money goes into the hands of an individual
with a history of poor spending habits. If the money is used in a wasteful
manner, or to "splurge" on a high ticket item, for example, the loan will
only add to the current financial burden if it is not used efficiently and
wisely. An additional loan used for these purposes can lead to bankruptcy
and financial destruction.
2. If payments are consistently late after obtaining
a poor credit debt consolidation loan, credit scores will drop even more.
3. Interest rates are much higher on poor credit
debt consolidation loans than for conventional loans. However, if the loan
is used wisely, it can be refinanced at a lower interest rate once credit
scores increase.
4. Poor credit debt consolidation loans that
involve collateral may mean that if the money is not used wisely, ownership
of the collateral may be at stake. The lender has the right to take the
collateral if payments are not made on time or not made at all.
After obtaining a poor credit debt consolidation
loan, and the debts have been paid, get your finances in order. Balance your
checkbook to the penny, and don't make any unnecessary purchases. Don't make
extravagant purchases, either. Remember, the reason for obtaining the poor
credit debt consolidation loan was to get back on track. Don't employ poor
spending habits that can make credit scores end up even lower. Stay away
from high interest credit cards, credit cards that can't be paid off monthly,
and especially, payday loans. If a large purchase is needed, such as furniture
or a vehicle, look into used items. Furniture can be purchased at thrift
shops and through newspaper classified ads. Join your local Freecycle group
(freecycle.com) to obtain items for free that you might otherwise consider
purchasing. Shop for vehicles through private owners, not at car dealerships.
Privately owned vehicles will offer a lower cost to you without any added
costs. Have a trusted mechanic check the vehicle over before you pay for
it, though.
About The Author
Rebecca Game is the founder of Digital Women
®, an online community for women in business. A 30 year entrepreneur
and dedicated to helping other women find small business loans. Visit her
site: Loans for Women
http://www.digital-women.com
|
|
our links
OUR
ARTICLES
DEBT
BUSTER TECHNIQUE
DEBT
GUIDE 2006
google links
How To Get Rid
Of Credit Card Debt
|
