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What Are Personal Loans
Unsecured personal loans are a great way to access funds when you intend to make some big spending. The flexibility they offer means that you have the choice to use them for whatever purpose you see fit. At the same time, since they are unsecured, there is no need for you to scour the world over to find something valuable as collateral.
However, due to the unsecured nature of the loan, it can be a bit of a challenge to qualify for it. This is especially true if you are to apply for one at banks and traditional lenders. It would be easier if you have established a good credit history or have had the chance to borrow with them before. But if you haven’t then you’ll have to prove that you are creditworthy enough for them to consider lending to you.
When it comes to borrowing terms, it is common for the best deals and offers to be reserved only to personal loan borrowers who have managed to maintain a good credit standing and an equally excellent payment history. If your credit standing is bad, they may still consider lending you the amount you need but usually at a very high rate. Most of the time, they will just reject you outright.
Can You Get A Loan With Bad Credit?
There are online direct lenders, however. Who may not be as stringent in terms of borrowing requirements as far as personal loans go. Most of these providers cater to the less than ideal borrowers whose credit ratings have not passed what traditional lenders required.
Instead of focusing their attention on how good or bad a borrower’s credit score is, they are more interested in the income that they are bringing home every month. If you can prove that you have a regular income and that the loan amount you wish to take out is seething you can afford to pay back, these lenders would be happy to grant you a loan.
If you have several credit cards that you are struggling to keep up the payments for, one option that you might want to consider is consolidating your debt and taking out a loan to pay it off. This is a process where to settle existing debts, you borrow money and then proceed to pay off just one single loan every month from there.
Generally, people take this route for the convenience it offers of having to only deal with one single loan. At the same time, it usually reduces the monthly outgoings since it may have a much lower interest rate compared to what you presently owe. For instance, if you have several debts that amounts to £10,000, you can take out a loan for the same amount to pay all the debts off, then pay the loan afterwards.
Pros and cons of debt consolidation
One of the advantages to expect from debt consolidation is that it has the potential to reduce your monthly payments. This is especially true for credit card debts which can incur very high interest rates. If you can get a loan with a cheaper interest fee attached to it, then you can save considerably in the long run.
Aside from being cheaper, consolidating your credit cards to one single loan is convenient. Instead of having to juggle several payments falling on several due dates every month, you’ll only have to cater to one.
Of course, there are advantages too. For instance, it may take longer for you to pay the debt off in an attempt to spread the payments into chunks that you can afford. There may be fees involved as well. If your credit score is not outstanding, there is a good chance that it might cost you more.
When to consolidate credit card debts
Understand that consolidating your credit cards may not always be the best option, especially when it will cause your debt to be unmanageable due to high repayments or if you end up owing more as a result.
It is, however, an ideal solution especially if you find that after consolidation, you get a debt that is still affordable to pay off and has a lower interest rate. If it does not unnecessarily extend your loan term, then it is a good option to consider. However, it is fairly common for debt consolidation loans to take longer to pay off.
Taking a debt consolidation loan
You can choose to sign up for a secured loan or an unsecured loan when consolidating your debt. Unsecured loans are usually for those with good credit standing as it is still possible for them to take out a loan and get good terms and rates.
If your score is bad, however, getting an unsecured debt consolidation loan can be difficult. One way around this is to secure the loan by presenting an asset to guarantee it. For this purpose, a car or a property would do.