Bad credit debt can be a problem for almost anyone and can arise for a variety of reasons. However, many turn to bad credit consolidation loans as a way to not only manage various sources of bad credit debt, but erase their bad credit obligations faster. However, many believe that in some cases a consolidation loan is not in a borrower’s best interest.
Consolidation loans can be an excellent way to manage multiple debt sources and can help many borrowers who may feel they are being carried away by their debt. However, bad credit consolidation loans, or any consolidation loan, may be more costly overall than paying debts separately.
Even with a low interest rate, a consolidation loan can still be expensive and cost a borrower much more over the repayment lifetime than paying debts separately. The higher principal amount that is associated with a consolidation loan is often the problem since it can take a borrower longer to repay and a higher principal will build more interest.
Bad credit borrowers who can afford to do so are often said to benefit from paying off debts one by one since smaller amounts can more easily be paid down. Yet, if various debt sources are causing financial strain then it may be better to take some added costs with a consolidation loan than for one to risk doing more damage to their credit score.