Financial setbacks in the lives of consumers are nothing new especially here when we have seen unemployment remain quite high and jobless claims rising and falling over the past weeks here in September, but there are also issues related to debt repayment obligations that some men and women have seen but, more problematic throughout 2011 due to situations like their employment and income or through simple financial missteps. However, there are still consumers looking for ways to consolidate debts and generally organize what they owe during times of financial distress, which have led some to pursue personal loans after they have seen a financial setback, but before taking this route it has often been advised that consumers look at current repayment costs from interest rates that may be available on loans that are offered to men and women with a low credit score.
Obviously, getting a line of credit isn’t something that’s impossible for a consumer with a low credit score, but it’s not always advised particularly if a personal loan is used for the purposes of consolidation. Some people feel that if they get a loan available to a bad credit borrower they can essentially kill two birds with one stone by consolidating debt and using this type of credit as one of the varieties in their financial life that can potentially help repair their credit score over the long run. Yet, some consumers may not fully research rates that are currently available on bad credit loans and as a result get a loan that is going to be more expensive once they have repaid all they owe.
While many consumers in a decent financial position may see personal loan rates from anywhere between 8% to 12%, understandably consumers in a bad credit position will see rates much higher that could be somewhere around 18% to 21% or more. These averages are simply a way for consumers to gauge what might be available in the best of situations and they are not a guarantee as some consumers may have put themselves in such a financial position where a personal loan will only be available at a much higher rate or it will require a secured loan before they can borrow.
Also, some homeowners have made the mistake of using their home equity to secure a personal loan, as they see low rates currently being advertised and feel that even with a bad credit score, the rate they receive on a line of credit that is secured by their home would be more affordable than a traditional personal loan. However, this is where consumers must make sure they look at why they are pursuing this line of credit and whether they are in the financial position to pay as much as they can to erase what they owe.
Some consumers in a bad credit position have simply borrowed a personal loan, with funds set aside that are used to repay this debt quickly, as a way to improve their credit score, but if a consumer has had problems and are looking to consolidate their debts, and it should be remembered that there are different debt relief plans outside of personal loans used for consolidation purposes. Currently, bad credit borrowers may be on an unstable financial ground, and if this is the case, rather than pursuing a personal loan after a financial setback or a reduction in their credit score, consumers may want to turn to resources like credit counselors or budget in such a way that allows them to combat their debts as they stand at the present time, but again the debt relief strategy that a consumer chooses must be a personal decision. However, no matter what type of bad credit situation a consumer faces, simply running the numbers as to how much a personal loan for debt consolidation will cost or whether it’s even affordable, compared with costs from other repayment methods should be a consumer’s first step when looking to repay certain debts.