When you have bad credit, it can be hard to drag yourself out of debt of any kind. Debt consolidationis a nice idea, but can you really get that achieved when you have bad credit? It feels like a never-ending wheel.
You want to consolidate your debts so you can get out of debt, but you can’t get the loan you need to do that because of your bad credit. And you can’t improve your credit unless you are able to pay down your debts.
What are you to do?
Pay At Least The Minimum Monthly
As you work on clearing your debts, you will want to try and pay at least the minimum amounts on all of your debts on a monthly basis. That may not help you to pay off your debts very quickly, or at all, but it will at least start to prove that you are reliable at making payments.
That will ensure that your credit won’t fall any further than it already has and it might help you to improve things a bit at a time. Debt consolidation loans from certain lenders still might not be possible, but it’s a start.
Look Into Secured Loans
Most personal loans are unsecured. That means you don’t have to have collateral in order to get the loan. These loans are more difficult to get because you have to have at least a 680 credit score or better to qualify. Once you have the personal loan, you are able to get the debt consolidated and then, you can pay off the credit cards and other things that you owe.
On the other hand, if you have equity in your home, you can offer it up as security in exchange for the loan. Banks will often go for this because they know they can take the property and sell it if the loan isn’t repaid.
Be Certain You Can Make the Payments
The last thing you want to do with debt consolidation loans is stretch yourself and clear your credit card debt only to have things get worse. There are two ways that things can get worse. One, you might realize that you can’t make the loan payments and you start to default on that loan. And two, you might start using your credit cards again and rack up more debt in that area.
Both defeat the purpose of getting the debt consolidation loan in the first place. You need to now you can pay for that loan on a monthly basis. You can start to improve your credit when you reliably pay on that debt. The debt will also start to go down.
While you are doing that, you also need to refrain from using your credit cards altogether. Those zero balances can be mighty tempting when you get the itch to spend. Resist it, or risk digging a deeper hole for yourself.
It is harder to get any kind of debt consolidation loans when you have bad credit, but it is not impossible. You just need to make sure you don’t jump on the process and then end up in a larger hole of debt than you were already in.
You can also try contacting debt settlement companies.
Should You Get The Loan?
Here’s the thing, in order for consolidation to be an effective strategy, you need the interest rate on that loan to be less than the average of that of the debts you’re bundling. You also need to keep the term short enough so that you don’t end up paying more overall. This can be tough to accomplish with poor credit. It isn’t impossible, but you have to shop very carefully.
When you start to think about the process, contact professionals and look into the options so you can figure out what is the best move for you. You want something that will better your financial status, not something you can’t handle. Having expert advice will help you to move in the right direction to clear your debt efficiently.