Another day goes by and we get yet another series of calls from individuals with bad credit looking for the magic provided by an unsecured debt consolidation loan. For some stratnge reasons individuals who are unable to qualify for car loan or a home loan, those who are only working casually or not at all, are all looking for the ‘silver bullet’ – the personal loan to consolidate their debts. There is little understanding of what it actually takes to qualify for an unsecured personal loan. There is only the anicipation that such a loan will solve all of the borrower’s financial problems, reduce their repayments and payy off their debts sooner. Much of this misunderstanding stems from advertisements in the media for debt consolidation loan. Unfortunately these advertisements do leave significant facts out. Here are some bad credit debt consolidation loan myths we would like to address:
An unsecured personal loan cn only help if in fact it is cheaper than your current forms of finance. The problem with having bad credit is that qualifying for an unsecured personal loan at a reasonable interest rate is next to impossible. While traditional lendrs will not accept a bad credit borrower looking for consolidation loan, some lender do offer unsecured loans. Be very carefull however – in our experience these loan can range anywhere from 20% to 45% pa and are unlikely to save you any money at all.
Paid defaults = bad credit. Your bad credit does not need to be current for it to present a problem in qualfying for unecured consolidation finance. Paid defaults and judgements can remain on yoru credit report for years to come and affect your ability to qualify for affordable unsecured finance.
A common compromise for bad credit debt consolidation is a debt agreement. However many applicants confuse bankruptcy with a debt agreement and automatically refuse to consider the debt agreement solution. It is important to note that while entering a debt agreement can affect your ability to qualify for finance in the future in a similar waythe way a bankruptcy may, the two are very different. With a debt agreement you always retain all of your assets and do not have to give up any of your income during the agreement period. Furthermore your debts do not preclude you from a range of lifestyle choices including overseas travel.
Unfortunately having a loan guarantor will not help with bad credit of the borrower. If yur bad credit results in a loan decline, this will not change with an income guarantor. An asset guarantor may however make some difference.
The reason that an asset guarantor may get a loan over the line is that bad credit loans generally require security. Borrowers who can offer a lender the security of a car or real estate have a resonable chnace of approval. Be very careful nonetheless, as bad credit loans can be expensive – even secured consolidation loans.