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Poor Credit Debt Consolidation Loans
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
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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
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