Good Advice for Bad Credit: Understanding the Debt Consolidation Loan

If you are struggling with bad credit, then you may do well to consider a debt consolidation loan to get a handle on your credit. A debt consolidation loan is set up to help people combine numerous loans into one lump sum. By grouping all of your debt into one account you eliminate the need to keep track of various balances and replace it with only one payment, which can be a good way to improve your credit.

While debt consolidation can be a good way for you to fix your bad credit, there are a few points you should keep in mind.

  1. This is a long term loan not a sure fix. While a debt consolidation loan, may help with your credit by eliminating the credits cards, it does not prevent you from getting other credit cards. Most likely bad habits got you in debt and bad habits can put you back there. A consolidation loan can not fix your bad habits you must do that yourself.

  2. Lower payments but more expensive. Although a debt consolidation will typically provide lower interest and therefore lower payments, it will also extend the term of the loan. By extending the term of the loan your total payment paid over the life of the loan will increase along with the total amount you pay in interest.

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