Will Bad Credit Bill Consolidation Help You?

Let us understand here the two parts - debt consolidation and bad credit. debt consolidation loans

Debt consolidation means bringing all your outstanding loans under one umbrella. Instead of paying for multiple loans such as personal loans, credit card dues, medical bills and collection agents separately, you pay only to the consolidating company, which pays off your creditors on your behalf. It is designed to also make repayment easier for you. Also, consolidated loans entail lesser interest than revolving credit on credit cards. Thus, it makes sense to take up these loans from a purely economic point of view.
 
The next part that you need to consider is 'bad credit'. Because of earlier defaults in payment, you may have gathered a bad rating. Probably the circumstances in your past were unavoidable, but as the records are shared with all lenders on a national level, this record will affect your future borrowings. 
 
People with bad credit records always attract higher interest rates as companies take a greater risk in lending to them. So the lower your credit score, the higher the interest charged from you. This interest is based on the prime lending rate, and is 2-3 percentage points higher than it.
 
Now, if you are a bad credit account, the same debt loan will cost you more than what it would cost a person with a good credit rating. However, bad credit bill consolidation helps you even when you pay a higher rate of interest. How? 
 
Earlier, if you had a bad rating - it would be impossible for you to get a loan. Now, however, financial institutions have made a business out of people's need to improve their ratings and a debtor's market. If you have the means to pay it, a bad consolidation loan pays off all your existing debts and if you keep your payments, your credit rating improves over time. 
 
Basically, it shows creditors that you have every intention of returning the borrowed money, and you pay a higher interest to win back the trust. If you can secure a bad credit consolidation loan, it acts as a shortcut to the process of getting back to a healthy credit rating.