There are a lot of advertisements for credit card consolidation, but the biggest problem is that your credit must be good in order to get approved. Unfortunately, most people that have struggled to make the minimum payment on their card each month, have also occasionally made a late payment, tainting their credit in the process. What is a person with bad credit to do if they are interested in consolidating their credit card debt into one low interest, easy to pay loan?
Use the Equity in Your Home
One of the easiest ways to secure a credit card consolidation loan when you have less than perfect credit is by putting up the equity in your home as collateral. If your home’s value has increased since you purchased it, you can borrow money against that amount. A lender isn’t as concerned with your credit when you take out a home equity loan to pay off your debts. For the lender the risk is minimal. You don’t want to lose your house, so chances are that you are going to do everything in your power to see that the home equity loan payment is your first budget priority. If for some reason you can’t pay the loan back, the lender doesn’t lose out, because the company can recoup its investment by acquiring your house.
Expect Higher Rates
If you have bad credit and you are not a homeowner, there are still ways for you to get a consolidation loan. However, you have to expect a higher rate of interest than you would have if you had the collateral of a home or better credit. Doing your research and comparing debt consolidation loan companies will ensure you get the lowest rate possible for your credit situation.
Use a Credit Management Service
Credit management services that negotiate with credit card companies to lower your debt often have programs in which they pay your monthly payments to all of the companies that you owe, using money from the one check that you write to them each week. While it isn’t exactly a consolidation loan, because your creditors aren’t paid off all at once but instead receive monthly payments, it functions the same way that a consolidation loan does. It lowers your interest and allows you to make one monthly payment instead of several.
Carrie Reeder is the owner of http://www.abcloanguide.com. View her recommended sources for consolidating credit card debt with bad credit.
View her recommended online companies to help you with a debt consolidation loan for people with bad credit. Also, view her recommended bad credit debt consolidation home loan lenders online.
When it comes time to consolidate your debt, there is more than one kind of service available. It is wise to research each type of consolidation service so that you can choose the one that is best for you.
Home Equity Debt Consolidation Loans
Home equity consolidation loans use the equity in your home to give you the cash to pay off your high interest credit cards. The idea behind a home equity loan is that the interest on the mortgage will be substantially less than the interest on the credit cards. This is true initially, but if you choose to take a long time to pay off your mortgage, over the years, the amount of interest you will end up paying can total much more than the interest on your credit cards.
There is also the risk of losing your house, which must be carefully considered. A credit card company can’t take your house away, but if you use your house as collateral to get a loan to pay off your credit cards and something happens that prevents you from making your loan payments, you could lose your house.
Debt Consolidation and Credit Counseling
Credit consolidation loans are often a great option for lowering your monthly payments and the overall amount of interest that you will pay. Often offered through credit counseling companies, these consolidation loans come with the benefit of having someone work with you to budget a way to pay your debts off. Often the consolidation company will negotiate on your behalf with the credit card companies to actually lower the amount of money you owe. This is a great option if you don’t own a home that you can use for a home equity loan.
Be Wise With Your Credit Cards
One thing to remember when you get a consolidation loan; you will see an immediate drop in your monthly payment and it can be tempting to start buying things when you see the zero’s on your credit card statement, but be wise with your credit cards. Just because you have consolidated your debt, doesn’t mean you don’t have to pay anything back. Don’t get stuck with a consolidation loan payment and another stack of credit card bills.
View our recommended debt consolidation services companies online.
Also, check out recommended lenders for a home equity loan online, or view our recommended lenders for debt consolidation mortgage refinance loans online.
|
|