How Badly Does Debt Consolidation Hurt Credit

Consolidating credit card debt comes in a variety of shapes and sizes. Not matter what your current credit score is and how much debt you have, you can find a loan that will fit your needs. Here are some common ways that people consolidate their debts.

If you own your home, a home equity loan is one type of consolidation loan you may want to consider. Many people who are struggling with high interest credit card debt turn to these consolidation loans. Because a home equity loan is a secured loan backed by the value you have built in your home, the interest rate will be substantially lower with this type of loan than you would have with a personal loan.

Home equity consolidation loans do have one danger. If you do not pay off your loan on time, you will lose your home. The bank has the right to repossess your home and sell it to claim what you owe. Only use this type of loan if you know you will be disciplined to pay it off when it is due.

Unsecured consolidation loans are an option if you do not wish to put your home at risk. These have higher interest rates than secured loans like home equity loans, but you will not risk losing a valuable asset if you should end up in trouble. You can get unsecured consolidation loans from most lenders.

If you have a bad credit rating, you may need to shop for bad credit consolidation loans. These can be either secured or unsecured, but they typically carry a higher interest rate than loans for those with good credit. However, they give you the ability to manage your debts without the strain that comes from overwhelmingly high credit card interest rates.

Consolidating credit card debt is a good way to help manage your finances. Just remember to stop adding to your debt once you get a loan. The loan will only make your debt worse if you continue accumulating debt after getting it.


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