Bad Credit Debt Consolidation Loans – A Definitive Guide

Plagued by bad credit history? Are you in two minds about opting for a bad credit consolidation loan due to all the fearful things you’ve heard about the whooping interest rates? All said and done, and the fear baggage aside, a bad credit debt consolidation loan comes to your rescue when you have run into bad credit and are looking for ways and means to tackle your debt.


What is a bad credit debt consolidation loan?

Any bad credit debt consolidation loan essentially gives you the freedom to transfer your current loans and debts on to one single loan account (and hence the name debt consolidation loan). This consolidated loan is used to clear off multiple debts. Once these multiple debts are paid off using the consolidated loans, you are just left with a single loan to clear and a solitary payment to make per month.

What are the various types of bad credit debt consolidation loans?

There are few types of loans which you can make use of to consolidate your debts and get back into good credit. The kind of loan chosen may vary based on your needs and current credit status. So, let’s take a quick look:

1. Loan against property: Depending on your current financial status and credit history, you can avail loan against your home or property. Home equity loan or cash-out mortgage refinancing are examples of debt consolidation loans that are much in demand from people with bad credit. Since these are secured loans, they are offered at a lower rate of interest as compared to other loans. On the flip side, in case of defaulting on your payments, you stand every chance of forfeiting your property.

2. Personal loans: You can also avail personal loans, which are unsecured loans (can be secured loans too), from banks or other lending organizations to consolidate all your debts. While in this case you need not worry about providing collateral or a security against the loan, you will have to bear the burden of a higher interest rate. This is because when you have a bad credit status, most lenders would consider it risky to lend money to you. Since this is a high-risk bad credit debt consolidation loan, the interest rates are higher.

3. Credit card balance transfer: You can also consider a credit card balance transfer. This applies when you have piled up huge balances on your credit cards. However, in this case you need to ensure that the credit card on which you transfer all your loans has a higher credit limit to accommodate all your loans. One major drawback of this bad credit debt consolidation loan is that as the outstanding balance for one credit card is too high, it adversely affects your credit score.

How do you find the right lender for the bad credit debt consolidation loan?

To avail loans in such dire situations, you need good negotiating skills. A good idea is to rope in a debt management company, who will analyze your situation and negotiate with the creditors on your behalf. Here are some tips that you could use:

1. Look for reputed lending organizations, which provide loans even to people with bad credit history.

2. While looking for a potential lender, get recommendations from conventional banks and finance agencies.

3. Convince your potential lender that you won’t be a risky customer and that you are looking at improving your credit history.

4. Consider putting forth collateral – any valuables or assets. This will assure the lenders that their money is not completely at risk, and thereby will improve your chances of getting the loan and at better terms. However, you need to bear in mind that failure to stick to the repayment schedule on such bad credit debt consolidation loans may lead to a situation where you will have to surrender collaterals to the creditor.

5. Most importantly, choose wisely, plan meticulously, and diligently keep up with the repayment schedule.

It is important to remember that your hard-earned bad credit debt consolidation loan should ensure an improvement in your credit rating. So, financial discipline will be important.

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