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How Debt Consolidation Loans Can Improve Your Credit Score

Are You Saddled with Bad Credit and Debt?

If you’re in debt and looking for solutions, you’ve probably come across debt consolidation. Under the right circumstances and done by a professional, debt consolidation can be a perfect answer to eliminating debt. Some debt consolidation companies can even eliminate some of your debt immediately and lower your interest rates by negotiating with your lenders. However, what if you also have bad credit on top of your debt and haven’t been able to get approved for debt consolidation? You may be in luck if you can find a bad credit debt consolidation loan. These are simply debt consolidation loans for people who have bad credit. Everything basically works the same way as normal debt consolidation, except these loans often carry a higher interest rate. Fortunately, by making your payments on time and staying up to date with your loan, most lenders will eventually lower your interest rate.

There are typically two types of bad credit debt consolidation loans available:

  • Secured bad credit debt consolidation loans
  • Unsecured bad credit debt consolidation loans

Secured bad credit debt consolidation loans use collateral to secure the loan, usually your house or another valuable asset. Since the lender has a piece of your property as collateral, they are more likely to offer better interest rates and terms. An unsecured bad credit debt consolidation loan involves no collateral, but has higher interest rates and may be for a smaller amount of money. Although these forms of bad credit debt consolidation loans have their differences, they both offer a chance to improve your credit score.

How Debt Consolidation Loans can Improve Your Credit Score

While the primary goal in debt consolidation is usually to get yourself debt free, you can also get the benefit of improving your credit score. However, the process takes time and you probably won’t see many immediate results. In fact, it takes most people about a year of consistently making their payments on time and in full every month to start seeing improvement in their credit score. Your credit score can also improve over time as you pay off debt, since a major aspect of your score is the amount of debt you have. Keep in mind that you can potentially damage your credit score if you don’t make your payments on time. Don’t let the possible long wait get you down though, debt consolidation remains a great way to eliminate your debt completely and eventually bring up that credit score.

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Debt Consolidation Tools
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