Debt Consolidation With Bad Credit Record

If you have accumulated multiple credit problems, you have the option to consolidate and merge all your existing loans, into a single manageable unit. This is known as Debt consolidation, a loan-repaying scheme that seems to be gaining popularity with each passing month. It simply means that you will have to take out one debt in place of many others. This is done so that you can secure a lower interest rate, as well as pay at a single rate of interest, or sometimes, it is simply done for the convenience of paying off only one debt.

Debt consolidation can be done either in secure or unsecured form. In case of secured debt, you can avail a huge amount of loan, which is not usually available if you do not have collateral. In addition, having collateral also reduces the rate of interest, making it comparatively low.

Unsecured loans, on the other hand, offer a limited amount of loan, for a short period of time. The rate of interest in this case is also high, and should be availed only when you do not want to put your property as collateral, or when you don't have any.

Debt consolidation from bad credit lenders

The choice of debt consolidation is also available when you have a bad credit history. However, this means that your bad credit lender who gives you the loan for debt consolidation is taking extra risk by repaying all your other loans and defaults. You already have a bad credit record, and so, no one else is ready to give you a loan.

This usually means that you will be desperate to get the loan, and ready to pay a high amount of interest - sometimes even up to 20% - 22%! Though your monthly payment is lower than what you used to pay, you end up paying much more than what you should have.

This is a huge profit for the bad debt consolidator. At the same time, the collateral assures them the return of their investment. They can easily obtain the money for foreclosing the property.

Good debt consolidation moves

A home equity loan is a relatively low cost investment. You can also do a "cash-out" refinancing of your home. But as this is a one time only option, as the total interest over the years can run up to be pretty huge. Refinancing your car is also a good debt consolidation move, if your debt is lesser than the cost of your car.

A good debt consolidation scheme can be very useful, as it allows you to pay your loan only once a month. You will not have to pay your late fees anymore. In addition, some of the creditors may even "re-age" your account and improve your credit rating.