Going through a bad phase? Making significant losses in business? Well, bad times do not come with a warning and might strike you really hard. It does not take long before you run into debts. Imagine you have borrowed money from several sources for a huge project and it fails entirely. Everything does not turn out how you expect it to be, right? The best way then is to control the damage done. Your lenders will not sit back and sympathize for your losses. They too have business to do! But there is always a solution if you look for it in the right place. Today, we will throw some light on what can help you solve such an issue. Step one, do not panic.
Financial institutions offer you an option of taking a debt consolidation loan with no credit check. Now, what is a debt consolidation loan? This type of loans helps you to pay off all your outstanding debts by merging them into a single one. Basically, you pay to one lender and not to a number of them. When all your past debts are cleared, a new loan repayment cycle begins where you pay a monthly instalment to clear the debt consolidation loan. This repayment cycle will be a friendlier one than the loans you had to clear off.
Types of Debt Consolidation Loan
These loans are of two types secured with collateral and unsecured. The borrower gets to choose the loan, which suits his debts by considering factors like, whether he is a homeowner, or not, the money required and the time period he will require the loan for, etc.
Poor Credit Score?
Having a poor credit score is indeed not a worrying sign. The interest rate will be high, but you will still get the loan. Logically thinking, one will need the debt consolidation loan most when his credit scores will not be very friendly and he will have a lot of debts to clear. But also, you will find difficulty in finding a lender who will provide you with money without any security. Secured loans are the ones you are most likely to find in such a situation.
Effect on Credit Score
Many might have this question about how a debt consolidation loan affects the credit score. Well, it does not have any part in the reduction of one’s credit score unless you miss your monthly instalment. In fact, it might be a good way to improve your credit score, by showing how serious you are in the matter of clearing your debts.
Other than business losses, a debt consolidation loan can also help you pay off your credit card payments and other personal debts too.
In the UK, a lot of people struggle with their debts. The number has reached as high as 8 million. So, you are not alone.
Have your calculations double-checked!
Again, one needs to be very careful before applying for this loan. The interest rates of your pre-existing loans might decrease when merged into a single one but there is a chance of it being increased too. The debt consolidation loan follows the general trend that the amount of money you borrow is inversely proportional to the interest you are paying. But it is not a very wise idea to borrow an insane amount to decrease your rate of interest. It might lead you into greater debt.
People also have the idea that with this loan the amount of debt decreases. No, it does not. You will have to pay off the entire sum you borrowed.
The monthly amount, which is pending to pay, becomes manageable. An indebted person has a hard time dealing with his financial stability. This loan helps you gain full control of it.
Debt Consolidation Loan Is Not Your Plan A
Yes, it sounds like the best way to get out of recurring debts but apply for it only if you need it badly and your calculations give you a positive result. Be sure to check for other options to clear off your debts before taking another loan, which might keep you indebted for a longer duration of time. Debt consolidation loan with no credit check is a helpful aid when used wisely and responsibly.