If you have been happily flashing your credit cards at all shopping places and just found out that you have a ton of credit card bills that need to get paid, it may seem like help is nowhere to be found. But you may not know that there is a way that you can get all these bills to be paid off and just worry about one payment to make. Below are some answers that you may have regarding debt consolidation loans and how it may affect your credit score.
They May Affect Your Credit Score
So do debt consolidation loans hurt credit score? Unfortunately, a loan like this may have an effect on your credit score. If you have a decent credit rating it might be lowered because now that you pay off those credit cards by taking out another loan, as a result you may have lower debt to credit ratios on your cards and other dues. The most important part here when you decide to get a loan to pay off other debts is to be able to pay it back within the given time frame and avoid defaulting on payments at all times. What may happen then is that your rating which is carefully reviewed by a financial officer will remain positive.
On The Positive Side
Now, taking out debt consolidation loans will not technically hurt your credit score as long as you are able to meet the payment deadlines, so just have to make sure that you follow the guidelines you were given when you were approved for a consolidation loan. Many people actually use debt consolidation loans successfully and still have a good credit score at the end of the payment period and then can get a new loan because they were able to make payments on time. If you are also facing this situation right now, just make sure that you are fully aware of what you have entered and ask a financial professional if you have any questions at all. The more knowledgeable you are about debt consolidation loans and credit scores, the less likely you will be to get into trouble later on.
Consolidating your loans is not the end of the world and in fact it may even help you save money by paying just one loan with a low interest rate instead of several loans with different interest charges. The money that you are able to save when you pay one loan could be used for other purposes like building an emergency cash fund or a savings account. When you have plenty of savings, it will reflect positively driving your credit rating up with good prospects. Always look around for the best loans that may help you get out of the debt and try to stick to your budget so that you will never have to worry about having no money to pay off your newly consolidated debt.