Consolidating bad credit
When you’re already struggling with poor credit, trying to manage a variety of high-interest loans can make matters even worse.Not only are you forking over your hard-earned cash to pay on those interest rates, but juggling multiple payments each month can lead to forgotten or missed payments.You’ll want to comparison shop loan terms, as well as check out the reputation of the providers, before entering an agreement.Of course, the best place to start is by reading the expert reviews on our top companies below.In many cases, having multiple credit accounts in good standing can improve your score — but, when you fall behind on one type of debt, it can strain your ability to keep up with the rest.
In an ideal consolidation world, Pete would be able to pay off all four of his loans with a single, larger loan that averages out to a lower interest rate than his current debts carry.
Her straining pocketbook held the financial equivalent of a Baskin Robbins — it looked like she had an entire 31-flavor buffet of credit cards.
Though this woman may be an extreme example, most of us do tend to have a variety of credit lines at any given time — usually a combination of installment loans (mortgages, student loans, auto loans, etc.) and credit cards.
Not only would he be able to simplify his payments, but he’d lower them, as well. At the very least, Pete could lower his monthly payments by getting a new loan with a longer term length — up to 30 years in some cases.
While this will mean he’ll pay more interest over time, it may help him better manage his payments in the short term, helping to prevent missed payments or even default. Credit cards and other high-interest unsecured debt (debt not backed by collateral) are the main reasons many people consider debt consolidation.
A large number of credit cards can carry interest rates in the high double-digits; rates of 20% to 25% (or even more) are especially common in the subprime markets.