Effective Ways To Consolidate Your Debt

UNDERSTANDING INDEBTEDNESS

Indebtedness is a situation, which arises in case of failure of repayment of loans within the stipulated time duration, which results in overburdening of financial bills and abnormally high-interest rates, which may lead to bankruptcy. An individual must use his/her financial resources with great caution and responsibility. It is generally discouraged and looked down upon when you owe large amounts of money or have a bad credit score. It injures an individual’s financial reputation and legitimacy.

debt consolidation loans

DILEMMA FACED BY DEBTORS

One solution to pay off all debts is resorting to debt consolidation loans for bad credit with no guarantor widely available in the market by direct lenders as informal sources of credit. The situation of indebtedness is such that the individual is deprived of formal loans from the high street, government-run institutions like banks, which do not wish to extend loans to people with a bad credit score.

OTHER PROBLEMS

In case there is an absence of guarantor, it is still very difficult to move the banks for accepting the loan application pertaining to the risk minimization strategy followed by them. In such dire circumstances, when all other financial resources are exhausted and no help can be arranged, one can freely apply for an unsecured loan for debt consolidation. One striking feature of such loans is that money can be borrowed irrespective of past credit record, availability of guarantor, collateral or any other conditions.

WHY INFORMAL SOURCES OF CREDIT?

Everyone is eligible to apply for such loans. This is what makes direct lenders approachable and client-friendly. Direct lenders also provide for unsecured loans with bad credit history and applying for these loans is easy and convenient too.

Although one cannot avail an authorized loan with a poor credit history, lax loans can be a solution to financial requirements. Some direct lenders wish to overlook the credit history and extend loans in spite of having no guarantee or a good credit score, ready to hoard the risks accompanying it. There is no need for collateral or guarantee to avail these loans.

IMPORTANCE OF A GOOD CREDIT SCORE

Credit score, credit record or credit history are none the same. These terms refer to the reputation of a person’s credit activities in the past and taken into account by other boards for any future loan activities. It is calculated by considering the repayment of past loans, punctual credit card payments, bills, etc. It is very crucial to have a strong credit record to get loans of large amounts at a lower interest rate. Hence, credit score is the reflection of a person’s credibility and responsiveness. A bad credit score is a drawback and can create hurdles in financial development. This can be due to negligence or, like in most cases, unforeseen dire circumstances like a sudden loss, or bankruptcy. The one and the only way out is to seek help from direct lenders, who will provide informal sources of credit without a credit score check and guarantor.

DRAWBACKS OF UNSECURED LOANS

Because of these provisions, these loans tend to charge a higher rate of interest as compared to traditional formal sources of credit. The terms of repayment are clearly specified beforehand. Most lenders are only willing to give short term loans pertaining to the risks they are already carrying. Some demerits of unsecured loans are that they charge a comparatively higher rate of interest. Hence, one must consider affordability, need and terms and conditions before taking a loan.

OTHER PLAUSIBLE SOLUTIONS

Before taking any decision, it is suggested to skim through all available options and weigh their pros and cons. You should make a judgement. It is clear that in case no other option is available, in case a deadlock situation arises, debt consolidation loans are there for the rescue. But, attempts should be made to avoid such situations in the first place. Some steps needed here are – regular payment of bills, cutting down on unnecessary expenses, planning a budget with wise discretion, prioritizing the necessities, seeking expert advice and developing a habit of saving money.

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