| Does Consolidation Affect my Credit Rating? |
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A debt consolidation loan is actually a personal type of loan whereby a lender will loan money so a person can pay outstanding bills. In other words, let us say you had a number of loans, credit card bills, doctors’ bills, and so on, taking all your money every month. Instead of being swallowed alive, you could consider having all your outstanding debt rolled into a single loan, which will help eliminate stress while lowering your monthly bills.
You will find that a number of different debt consolidation loans exist, some being secured and some unsecured. With a secured consolidation loan, this means that you are required to have some type of collateral as protection against the loan. This might be money in a savings account, a car, home, etc. With an unsecured type of debt consolidation loan, there is no collateral needed, simply your signature. Of course, being qualified for this type of loan takes a number of factors into consideration. You also need to think about whether a debt consolidation loan is actually the best choice for your situation. Some things to think about in making this decision would include:
Now, if you think you might be interested in something such as this, you would need to ask yourself, does debt consolidation affect my credit. The truth is, like any other type of loan, a debt consolidation loan is reported to the three main credit reporting agencies. Therefore, the date the loan was secured, the amount of the loan and your payment history will be maintained. This means that if you were to miss payments or be late on payments, your credit rating would be affected.
Before you lock into any debt consolidation loan, you want to make sure you choose the right lender. Otherwise, you could find yourself in a much worse situation, which would definitely have an effect on your credit score. Some of the factors that you as the borrower need to look for include:
Before getting involved with a lender for a debt consolidation loan, look at the amount of money you owe to determine if this is actually the right solution. You should also create a solid budget that uses an equation of debt to income. If you are unsure the right way to create a budget, you can always meet with a financial advisor to assist. From there, you and the lender will need to go over all the information to make sure you are borrowing the amount of money actually needed and nothing more. This way, you have the opportunity to get ahead financially while maintaining a positive credit rating.
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