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For example, say you have three unsecured debts through your bank and two unsecured debts with another outside lender, the bank may approve the consolidation of all five debts to be covered by the one loan. While low-risk borrowers may receive acceptable interest rates ranging from about 7 to 12 percent, higher risk borrowers can expect to pay interest rates ranging from 14 percent to over 30 percent among second-tier lenders, which can do more harm than good.
Once you’ve paid off your credit cards through the consolidation loan, you will continue to have access to these accounts, but now with zero balances.
If you’re struggling to keep track of multiple debt payments each month or have high-interest debt that you’d like to refinance at a lower rate, a debt-consolidation loan might be an option for you — even if you have what creditors consider “bad credit.” But your credit may make it difficult to get favorable rates and terms on a debt-consolidation loan.
Before you commit to any loan, make sure to explore all of your options.
When you’re in debt there are smart ways for you to deal with debt.
While your aim will be to reduce your monthly outgoings to help your monthly budget there are two key issues to keep in mind when looking at the options: There are unsecured loans suitable for bad credit situations (e.g.