Nowadays, more people deal with having to pay credit card balance to multiple companies. It can be a major headache because due dates may vary, interest rates too. When you have bad credit, there are only few solutions to this. You can consolidate credit card debt with bad credit score, actually. Lending companies begin seeing opportunity for this side of business. But as debtor, there are some things you need to be aware of before you decide on consolidating your debt.
Consolidating Your Credit Card Debt When Having Bad Credit Score
A person may have more than one credit card account to serve various purposes. It can be used to pay for daily needs, insurance, or mortgage. That means borrower must make several payments with different interest rates (often very high) every month. Because of that, many credit card holders are thinking to consolidate their debts into one. They will take a new loan to conclude their current balance so every month they only have to pay one bill with a single interest rate.
But is it always a good option? Furthermore, will it beneficial if you consolidate credit card debt with bad credit score? There are some points that need to be considered when borrower is going to choose this route. The first step is to calculate all of your debts to know how much money is needed to pay them off. After that, estimate the amount of payment which can be made without disrupting other aspects in life. Consider duration of introductory APR as it can give borrower chance to pay off debt with lower interest before it goes up to standard rates.
Consolidating debt can have positive impact on credit score. If on the previous debts borrower maximized their credit card utilization, they can manage debt better in this new account. Lower credit utilization can increase credit score. It is recommended not to close old credit accounts as closing them will shorten the length of credit history, which in turn will decrease credit score.
However, lender does not always have your well-being in mind. As stated previously, you can definitely consolidate credit card debt with bad credit score. But the interest rates that these institutions offer can be off putting and possibly harm borrower in the future. Sometimes it is their regulations which will make your head spin. Introductory APR (can reach 0%) at times is only applied to payment made on balance transfer.
It is hard to obtain debt consolidation loan from bank if you have poor credit score. Credit union and peer-to-peer lending platform are the most plausible options for this case. Select institution that has been licensed to provide this type of loan in your state. To help researching the best service, borrower can seek help from certified loan counselor.
The choice to consolidate credit card debt with bad credit score is on borrower’s hand. It can be a disaster when not thought thoroughly. However, if planned well, it will be beneficial to your credit score and future finance.