Loans To Pay Off Personal Debts With A Bad Credit Score–Potential Rates Unsecured And Secured Options For Borrowers

Loans have been one route that consumers can take when paying off personal debts, particularly when a bad credit score is in place and the result of multiple debt obligations which have become too burdensome for a particular consumer to handle. Yet, there are still areas of uncertainty that consumers often ignore when they are looking at bad credit loans that may be available from either unsecured or secured lines of credit to help them consolidate their debts and get themselves on a path that will lead to debt repayment and eventually bad credit repair.

The issue of bad credit repair is one that can be quite complex and deserves a great deal of attention due to the various aspects of that particular topic, but paying off debts is the first step that a consumer needs to take so that they can find themselves in a position where it will be more affordable and less stressful to repair their credit history. However, the topic of debt relief is also one that can be overflowing with information, confusion, and poor choices if a consumer doesn’t take the time to look at not only their financial situation but loans that are available to help with this particular form of repayment assistance.

For this particular topic we are working on the assumption that a consumer has explored different debt repayment opportunities and has come to the conclusion that, even with a bad credit score in place, a loan to pay off their personal debts will be the best option for their situation, and some consumers may simply be unable to meet minimum payments on all of their combined debt obligations, which again may have led to their bad credit score.

Consumers should not jump into a consolidation loan or commit to any type of bad credit debt relief specifically unless they have explored multiple options, but if this is the case there are a few basics related to both unsecured and secured personal loan options that may be available for those with a poor credit score. Ideally, consumers will acquire one of these loans, make on-time payments and erase their debt in a timely manner. However, depending on a consumer’s situation, there may be unsecured options available that could bring interest rates of around 9% or 10%, but since this is a bad credit situation, it’s more likely that the rate that may range from anywhere between 15% to 25% or higher.

While this may seem excessive to some, this is why looking at the various options will be necessary as these rates may be associated only with unsecured options, but of course even a secured loan may come with an average rate of around 20% or more depending on borrower’s situation. Offering collateral can help reduce a borrower’s interest rate but this can pose a problem as a consumer could lose this collateral if they fail to meet their payment schedule.

So, looking at the rates on both unsecured and secured options will be necessary, as some borrowers looking for a loan to pay off their debts, even with a bad credit score in place, may be able to show that financial hardships like unemployment or illness led to their inability to manage their finances and, if their income or financial life has stabilized, a bank may view them as less of a risk despite the fact that their score may have dropped.

Finally, what consumers need to remember about this interest rate, which should obviously be as low as possible for those who are exploring these bad credit personal loans, is that the repayment timeframe on a loan will also impact their overall costs, so looking at the monthly payments on a personal loan used for debt relief through consolidation will be necessary as well, since some consumers may be able to meet a higher minimum payment and erase their debt faster and at lower costs. Yet, for those who are struggling financially and need a lower monthly payment and longer repayment timeframe, it needs to be understood that this could lead to higher overall costs when all is said and done despite the fact that affordability is being seen on a monthly basis.