Meeting regular needs and life goals simultaneously is challenging. Most people live from paycheck to paycheck in the current economic situation. They could hardly save enough to meet critical bills and survival needs. However, everyone has a goal of refining their lifestyle. They want to live up to their dreams despite the financial scenario.
Thus, they seek different ways to finance their short and long-term goals. For example- buying a car. It is difficult for someone who struggles to save enough. A car finance solution may help the person drive the car and pay later.
Apart from that, some instant cash options help fix emergency and urgent cash needs. It is useful in times of crisis. These facilities add to comfort and ease of lifestyle. However, in the end, it is a debt, and you must pay it. Individuals failing to repay the monthly instalments add up interest on the dues. It makes the credits in the account too costly to repay. It is when individuals seek wise solutions to get debt-free.
Debt consolidation loans emerge as a suitable solution here. These are of two types- secured and unsecured. The blog discusses the unsecured debt consolidation loan. Analyse you may help you get debt-free quickly.
What does an unsecured debt consolidation loan imply?
Unsecured debt consolidation loans are a financial facility that helps merge several debts into one payment. One can consolidate high-interest or low-cost loans according to priorities. Merging different debts into a single payment reduces liabilities. It slashes the interest costs and monthly payments. This event impacts your credit score positively. Your credit rating jumps by some points. It thus makes you eligible for affordable credit cards and loans.
These loans remain competitive. The lenders follow a strict eligibility criterion because it does not require collateral. One can get the money without pledging the precious assets. Individuals with stellar income and credit scores fetch better rates. However, you can get one despite low credit ratings.
How do you get a debt consolidation loan for bad credit?
A debt consolidation loan may help you control the finances and retract one. However, getting one with a low score is challenging. It is a long-term loan requiring constant payment. Usually, the amount to consolidate is high. If you choose a short-term, you pay a high monthly payment. With bad credit, providing affordability for that is challenging. However, a good employment history may fetch affordable unsecured debt consolidation loans with bad credit scores. Let’s know other ways to qualify:
1) Streamline your finances
A good payment history and timely payments are healthy for credit scores. It improves your credit rating and streamlines finances. Identify the pending debts you are yet to pay after consolidation. It may include utility payments, car repair bills or insurance premiums. Try to settle some of these. It reduces liabilities and makes you eligible for consolidation.
2) Get a co-signer/ guarantor
Getting a debt consolidation loan for bad credit is challenging. This is especially true for individuals sharing a poor credit history. If it may take time to repair your credit to fair, this may help. Co-sign the loan with someone with a good credit score and income. It increases your chances of qualifying. The lender considers the other person’s finances as reliable.
Hence, he approves the loan. However, you both must make regular payments equally. It is unlike a guarantor. He only walks up to the scenario if the borrower cannot pay. However, a guarantor’s incredible financial history helps the borrower qualify.
3) Improve employment prospects
As mentioned above, having a sound income increases the application’s reliability. For example, if your consolidation requirement is far lower than earnings, you qualify. The debt-to-income ratio helps one determine that. It measures the ratio of debts to the available income. If over 40% of your income goes to debt payments, you won’t qualify. Thus, this ratio can be reduced by increasing income and cutting useless expenses and credit card usage.
When should you consider a debt consolidation loan?
Like other loans, a debt consolidation loan has a purpose. It helps one settle debts quickly to achieve a higher goal. Thus, before applying for it, check the below conditions. It would be ideal to apply for the loan in any of these conditions:
1. Reduce monthly instalments
A consolidation loan is the best way to gain relaxation on the payment terms. It helps you reduce the instalments. It means you pay less than the previous agreement on the loan. It eventually increases your savings. You can utilise the money saved for other utilities.
2. Get finances back on track
It helps you improve your financial potential by granting some flexibility. It grants you enough time to think about your short and medium-term goals. You need to pay a single payment per month. Having optimised finances is the key to re-structure your dream investments. You can analyse and initiate investments that you have been waiting for long.
3. Get affordable business and personal loans
Having a good credit history and score helps you fetch budget-friendly loan terms. Applying and facing application rejections is frustrating. Moreover, paying extra because of low credit does not sound good. Instead, consolidate your high-interest debts. It streamlines your finances and credit score. You can get better business and personal loans. However, explore the best direct lenders in the UK by comparing costs. It would help you fetch the best deal.
4. Reduce liabilities to multiple lenders
Cooperating and dealing with very different creditors to tackle debt is exhausting. Moreover, you cannot meet all the terms and discuss them with every lender. Paying unique amounts to different lenders means saving separately. If you don’t have time for that, consolidation helps. You don’t need to tackle or save reminders every time. You only deal with a single creditor.
5. Re-build your credit rating
Multiple debts reveal unreliability on the borrowing part. Thus, individuals seek different ways to boost credit instantly. Nothing could be better than a debt consolidation loan. By merging debts into one, you reduce interest charges. It automatically decreases the amount you owe. Eventually, your credit score increases.
Bottom line Debt consolidation loans are a perfect solution to re-align your finances. It helps you analyse financial priorities and reach goals. You may get unsecured
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
