Can Debt Consolidation be bad if I’m Unemployed?
Immediately after losing your job, it can seem as if your personal finances are a disaster. When you don’t know where you’ll get your next paycheck from, it can be scary to think about how you’re going to pay your bills. Other than unemployment insurance, there isn’t a lot of help out there, especially when it comes to paying your bills.
Debt consolidation loans, however, do offer people the ability to reduce their debt payment every month without taking on more debt or lowering their credit score. Obviously, a lot of people are skeptical about this claim, but once they understand how these loans work, they feel a lot more comfortable with this financial tool.
A debt consolidation loan simply takes all of a person’s debt, such as their student loans, credit cards, and personal loans, and combines them into a single loan. All of the old debt is paid off, and you are only responsible for making a single payment on a single loan. In order to do this, every consumer who applies for a debt consolidation loan has to work with a debt counselor.
A debt counselor’s job is to personally review the financial situation of each of his or her clients. While many banks will refuse to grant a loan because a person has poor credit or a low income, a debt counselor is able to determine the causes behind each person’s credit problems. In many cases, a customer can be offered a loan with a lower interest payment and a longer loan term. These loans have lower monthly payments than the customer’s old debts, making him or her much more likely to make their payments on time and in full.
<p data-sp-element=”content”>Debt counselors know that making a loan easier to pay makes some people much more likely to pay off their debt. This is particularly true for people who are unemployed and looking for work, since maintaining their credit score is crucial to qualifying for their next job. By making it easier for people who are going through a temporary financial setback to pay off their debt, it is possible for a bank to increase the number of people who will pay back their loans. That makes it possible for a bank to offer people a lower interest rate, even though they normally wouldn’t be thought of as a good credit risk.