Debt Consolidation and your Credit Rating

Debt consolidation loans are tempting mainly because of their convenience. Instead of having to worry about dozens of bills every month, it is much easier just to pay off one bill. Without something to secure the loan, however, it is unlikely that candidates for debt consolidation loans will actually be able get these new low rates on loans because of their credit rating. Credit ratings effect the interest rates that individuals receiving on loans because they are a marker of how likely they are to pay off their debts. If an individual has a record of late payments, which most people would have who are looking for debt consolidation loans, then they are unlikely to receive low interest rates.

Although debt consolidation loans will not further hurt individuals’ credit, getting a loan with a good interest rate with their existing credit may be difficult to do. Debt consolidation will allow these individuals to have merely one monthly payment, but it is unlikely that this payment will have a lower interest rate. If individuals are looking for one monthly payment, then debt consolidation is the key. If individuals are looking for a low interest rate with their one monthly payment, it may be beneficial for them to work hard to pay their current debts without accruing late fees to show the companies that they are going to pay off their debts. Without the trust of the companies, shown by credit ratings, debt consolidation merely lumps these debts together without eliminating or lessening their high interest rates.