Credit protection

4 types of debt consolidation loans for bad credit to avoid

The best way to consolidate debt is with a best for if you have bad credit personal loans. (iStock).

Many Americans struggle with personal finance issues such as student loan debt, mortgage debt, and credit card debt. A personal loan will allow you to pay off all your debts on a responsible and affordable way, even if there is a significant balance on many loans.

Credible offers a free online tool to help you find the best rates and lenders for personal loans. Spending a little more time can save you both time and money.

Consolidate your debts with loans.

People with multiple loans are often smart to consolidate their debts into one personal loan. However, not all debt consolidation loans offer equal benefits. Consolidating debt should not be done with any of the following loans:

  1. High interest rate loans
  2. Loans with high fees
  3. 401-k loans
  4. Home equity loan

1. High interest rates for loans

High interest rates are not recommended for most situations, especially when consolidating debt. If you do your research, you may find rates as low 3.99% or even 11% on personal loans. It is possible to compare rates between different lenders and find the best rate. You will be able to see which one you prefer, and you will know if you are paying the right amount when you pay your debts.

There are many loan options available for consolidating debts, even for those with poor credit histories. Credible lets you compare rates, current lenders and explore personal loan options.


2. High-cost loans

You should consider the cost of the loan before you agree to a personal lender with a lower monthly interest rate. Some lenders offer personal loan options with additional fees. One of these charges is the original fee. Other names for it include “underwriting”, administration, or “handling”. These fees can easily reach 10%, increasing your refund unnecessarily.

Want to find out more about the fees some lenders charge for personal loan applications? Visit Credible to speak with an experienced loan officer who will answer all your personal loan questions.


3. 3.

Tapping into your savings account, even if it’s been years of investing in your pension (401) might be an option to pay off debt. It’s easy for you to view this as a chance to borrow from yourself but eventually repay the loan with the interest.

This isn’t always as easy as you think. You could end up losing your financial future by withdrawing money from your company’s 401 (k). You could be subject to taxes or penalties if the borrowed amount is not repaid on time. The amount of the loan you receive from your company may be reduced, which could limit your ability to maximize your retirement savings.


4. Equity loans

As your mortgage is paid off, your equity in your house will increase. This equity can also be accessed via a home equity loans, where you can borrow lump sums. Many homeowners use the equity to finance renovations or for emergency funds.

However, home equity loan should not be used as a way to pay off existing debt. The debt is tied to the property, making it possible for the loan to be foreclosed.

Use Personal Loans to Consolidate Debt

There are pros, and cons, to personal loans for debt consolidation. Here are some facts.

The Advantages

Consolidating debt with a personal loan can work well if you do your research.

  1. Lower loan costs: Combining multiple loans with low interest rates and low fees to reduce loan costs can be a good option.
  2. It is simpler to manage: Not just can you save on your total expenses but it’s also much easier for you to manage and keep track of a single loan.
  3. Stop late payments

Multiplying multiple high interest loans can become costly. Visit Credible to get the best personal mortgage rates.

The inconvenients

There are however, some things that you need to be aware of.

  1. However, not all borrowers will benefit from the same benefits.While a personal loans for debt consolidation can prove to be a profitable option, the benefits of borrowing are not the same.
  2. Your chances of getting approved may be low.Factors including your credit rating and debt-to-income ratio can impact the approval process. Personal loans may not be the best choice for consolidating debt. such as high credit cards balances.

Experian data estimates that the average American has less than $6,000 in credit-card debt. Balance transfer cards can be a great option if you’re having difficulty managing your credit card bills. A balance transfer cards allows you to transfer your existing creditcard debt to a new card at a lower APR.

To check if you’re eligible for a balance transfer credit card, visit Credible. You will find many 0% credit card options.


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