Debt consolidation is one viable method of ridding yourself from your debt issues. Though, it isn’t always the best method. There are some ways debt consolidation can affect your credit. Conversely, there is also a way that your credit situation can affect your qualification for a debt consolidation loan.
Will a Debt Consolidation Loan Affect My Credit?
If you are down on your luck and have no way of paying off your existing debt, due to a recent job loss or sudden costly medical bills, applying for a debt consolidation loan may be a good alternative. With this method, you can take out a loan, pay off your accounts, then pay a monthly installment for the loan you used. However, there are some issues with this approach.
Here are a few ways a debt consolidation loan can affect your credit:
- A debt consolidation loan is still characterized as a “debt” in your credit history. That means that your credit score won’t improve until you pay off your consolidation loan.
- After paying off your initial debt, you’re still forced to pay a consolidation debt, and there are strict consequences if you don’t pay up.
- A consolidation loan will only bring down your credit score, mainly because you’re still in debt after paying your initial debt.
Although a debt consolidation loan is meant to help you, it can actually harm your credit in many ways. Also, individuals with bad credit sometimes don’t qualify for consolidation loans, which defeats the purpose of the method.
Put an End to Your Debt
The whole debt elimination process is challenging. If you’re wondering, “Will a debt consolidation loan affect my credit,” then call Americor Financial Services and let us help you with your debt issues today.