Effects Of A Bad Credit Consolidation Loan
A bad credit consolidation loan can help you remove negative information on your credit report and allow you to rebuild your credit. Of course, not everyone is going to quality for one, so you must be prepared with an alternative plan. For those with bad credit, the chances of obtaining a consolidation loan with no collateral are not very likely, so the research is very important.
Researching lenders
The initial research should include obtaining a sampling of at least ten lenders who have indicated they offer consolidation loans to those with bad credit. Knowing in advance who the potential lenders are will save you time later on trying to sort through hundreds of lenders without knowing if they even offer the kind of loan you seek. This allows you to take your list of potential lenders and do further research to narrow it down to those who appeal to you the most. Once you have a list of only three to five lenders, you can do a detailed search by either Internet or telephone to find answers to questions that will allow you to finalize your selection.
What to expect
The long wait for loan processing is likely to be frustrating, but if you have all of the required documents for your loan before you begin the application process, it should go smoothly. Some of the documentation you may be asked to supply includes:
Proof of residence
Identification (driver's license, tax I.D. number)
Credit references
Explanation for credit issues
Documentation for collateral pledged if applicable
Proof of income
Proof of employment
The lending officer will let you know before the process begins what you will need, and if you handle the transaction on the Internet, you will need to have access to a fax machine to send any information that the lender requests.
Loan proceeds
If you have not already provided it, the lender will need names, addresses, and telephone numbers for the creditors to be included in the consolidation loan so that he can contact them for payoff balances and to finalize payment instructions. The loan proceeds will not be distributed to you, but they will be sent to each creditor.
If, however, you have applied for funds other than to pay off creditors, the difference between the loan balances and the loan proceeds will be paid directly to you. The way you handle the loan will be the difference between rebuilding your credit or not. The loans that are paid with the consolidation loan will be reported as paid on your credit report, but they will remain for seven years
. However, a paid bill looks better on your credit report than an unpaid one. In addition, any loan that had not yet been reported as bad debts may simply be reported as paid with no rating or a better rating than they would have if they had gone into a collection status. Use this as an opportunity to learn how to handle your credit without struggling to pay the bills.
Student-loan consolidation choices shrink - The Evening Sun
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