Bad Credit Debt Consolidation

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Bad credit consolidation resources

What is bad credit debt consolidation | We may define bad credit debt consolidation as those consolidation options for people with bad, poor or below average credit scores. Because the topic of 'Debt Consolidation' generally discusses both Debt and Payment consolidating approaches - your best choice alternative may be:

Bad Credit Debt Consolidation Alternatives

1. Loan
2. Plan/Program
3. Settlement

bad credit consolidation

So the first important point to note is: There may be a better-suited alternative to simply seeking a Loan, when looking to pursue bad credit debt consolidation. Furthermore: Before you approach a debt service provider for help with Consolidation - you should first consider all including non-consolidation alternatives.

Here we discuss the above three bad credit debt consolidation alternatives in summary. Later we explore the Loan approach in detail.

Bad Credit Debt Consolidation By Loan

A loan can be used to pay off your existing secured and unsecured debts. A loan for consolidation purposes itself maybe either secured or unsecured. Affordable bad credit consolidation lending often involves a secured loan.

A problem or characteristic of bad credit consolidation is the act of converting what was originally unsecured debt (e.g. credit card) into a new loan now secured against your house, car or other asset.

Choice over loan providers is the first problem faced by anyone seeking bad credit debt consolidation funding. Banks and Credit Unions are not geared towards bad credit debt consolidation lending. This leaves Finance Companies and specialist 'Debt Consolidation Industry' companies who are willing to engage in bad credit consolidation lending.

When contemplating bad credit consolidation using a Loan approach, it is essential to understand all your loan source options, not just a 'Debt Consolidation Loan Product' (DCL).

You should also realize that a loan does not get rid of debt or lower the principal owed, it simply transfers the debt into (what should be) a more favorable scenario.

 !  You can achieve the same consolidating result as a DCL - through other types of Loans that you may be able to access; where you simply pay off the original debt yourself, using the proceeds of the new loan or borrowing.

Bad Credit Debt Consolidation Characteristics:

  • The need to consider all/any loan alternatives for bad credit debt consolidation purposes (not just a DCL product) and any Non-Loan options.
  • The need to carefully consider and understand the terms of any DCL.
  • The need to watch out for predatory lenders and exploitative loan terms when moving forward with a DCL from a finance company or debt industry lender.


Bad Credit Debt Consolidation Under Plan/Program

If you are looking to resolve unsecured debt only (such as store and credit card balances) then the Plan or Program alternative to a loan may be an appropriate bad credit debt consolidation option.

Sometimes called 'Bill Consolidation' or a 'Debt Management Plan/Program' this is a service option that helps consumers consolidate their payments on unsecured debt.

The provider negotiates a reduced interest rate with creditors (the companies you owe) and instead of you paying each creditor, the provider steps in to make the payments for you under a plan. What you must do is make one payment only to the plan provider.

The benefits are that your payments become easier to manage and, given a reduced interest rate negotiated, the absolute total cost over the life of your debt (principal plus interest) is lowered.

Bad Credit Debt Consolidation Through Settlement

Again, for unsecured debt only, this bad credit debt consolidation option can be a viable alternative to bankruptcy.

A service provider seeks to negotiate, not just a reduction in the interest rate applicable on your debt, but also the principal balance owed. If successful, you end up paying less than you owed.

During the process, you make payments into a savings fund that is eventually used to settle the accounts. Your creditors are not paid during this time and the tactic of this approach is to induce the creditor to settle and recoup some money back rather than endure a bad debt. Consolidation through settlement is a bad debt consolidation alternative for many and must be very carefully evaluated. It is a risky option in many ways and is also commonly referred to as 'Debt Relief'.

Best Bad Credit Consolidation

Find resources and know your options for bad credit consolidation. This site explains all in detail. Although we have discussed by convention, the three main consolidation alternatives, only the loan option truly consolidates debt by bringing debts into one place, reconfigured with new borrowing. With a loan approach your original debts are paid off immediately and creditors satisfied. Bad credit debt consolidation using a loan method is available to many. The best quality companies offering bad credit debt consolidation have a range of borrowing options or products, the terms of which are clearly explained. How bad your credit is will affect loan terms, but products can be found for those with very poor credit. It is critically important to understand that people with bad credit are often the target of unscrupulous operators looking to take advantage of you. There are many reputable companies ready to help, but it remains essential to slow down and take some time to educate yourself before signing up for a new loan commitment. Next we explore the loan option for bad credit debt consolidation in greater detail and show you where to begin.

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