With a bad credit history, you should take out consolidation loans only when you have ascertained that it will not boomerang on you as a source of new debt. If the new loan turns out to be a new burden, you are likely to end-up in a crisis.
When you opt for consolidation loans, it implies that you intend to merge your outstanding payments into single payments of low amounts. In other words, your intention is to reduce the monthly outgoings. You can achieve this goal by taking out the new loan at lower interest rate. However, because of your history of late payments, payment defaults, arrears or CCJs, finding a low rate loan can be difficult.
Hence, direct your efforts towards finding a bad credit consolidation loan at lower rate. How can you do it? Well, since you have been repaying installments of your unsecured loans for few months, it is likely that your FICO rating has improved a bit, and you are most likely to get the loan at lower rate than the rate on unsecured loans. if your rating is still low, then wait for few months after some easier payments, and apply for the loan with improved score.
The interest rate is likely to be lower if you pledge some valued property like home or a vehicle for taking out a secured consolidation loan. You can borrow greater money for 5 to 25 years. However, it is not wise to carry the new loan for longer duration, as you will end-up paying high interest amounts. Tenants can opt for the unsecured loans, but interest rate will be higher and only smaller loan is accessible for short period of 10 years or earlier. Homeowners can also opt for these loans.
To take advantage of growing competition amongst the lenders, first apply for the rate quotes and compare them. You should also look for less additional charges on the loan. This way, you can find out a suitable deal. Make sure to repay the loan installment on time for making rapid improvements in your rating. |
