Debt is a reality for most consumers. It is very rare for a person to have cash on hand to purchase major, essential items like cars, houses or a college education. Even when a person is gainfully employed and making regular payments, any small change in this chaotic, unpredictable world is enough to throw a person behind in their bills, and bill consolidation loans may be a solution in such situations, even if you have bad credit.
Don’t Let Bad Credit Keep You from Eliminating Your Debt
It has been estimated that over 1/3 of the nation has bad credit. One out of every three people is a massive problem. If a debtor with poor credit has heavy, unmanageable debt to multiple creditors, they are a perfect candidate for a bad credit bill consolidation loan. Getting one of these loans is much easier than you might think, but you still must qualify—and of course, not all bill consolidation programs are created equal.
Before pursuing such action, there are a few things that one needs to consider.
- Organize Your Debts. First, get all of your bills together. Make sure that you have your last monthly statement, the total amount that you owe and the interest rate for each account. Take some time to go through your credit report and find those lost bills that you have forgotten about (or tried to hide from) to make sure everything’s included. Knowing your credit score—and what is affecting it either positively or negatively—is a vital part of the process. This step not only helps you gain a “big picture” view of your debts, it proactively pulls all debts into the same consolidation even if collection activity has not yet started. Once you start on a bill consolidation program, you want your consolidation payment to be the only one you are obligated to make.
- Use Due Diligence to Find the Right Bad Credit Debt Consolidation Company. Once you have everything organized and presentable, find a bank, credit repair shop or credit counseling service that offers bill consolidation loans for people with bad credit. Even if you have a poor credit score there are several companies out there willing to help. In addition, many of these organizations are designed specifically to counsel you on your spending habits. Some even receive federal funds to consolidate your debts. Use the internet to do your preliminary research then dig deeper. Consult with the BBB, business organizations, past clients and acquaintances to gain more insight.
- Know What You Can Include. One of the biggest mistakes you can make is assuming that certain debts aren’t eligible for consolidation. In reality, just about any type of debt can be consolidated, whether it’s credit card debt, collection accounts, or a personal loan from your Uncle Harry. Leverage Your Collateral. If You Are Seeking a consolidation loan, the lender will usually ask for some type of collateral up front to hold until the loan is paid off. The most common technique is to refinance your home or to get a second mortgage, and then to use the equity as collateral.
- Check Tax Benefits with an Accountant. The main advantage of bill consolidation loans is that the consumer can spread the payments out over a longer period of time, and possibly deduct the interest from his or her taxes. The tax deductibility of the interest payment does not apply in all circumstances though, so consult with an accountant to make sure. While it generally takes longer than other debt relief options, this option also makes the smallest dent in your credit score, and is typically the cheapest.
Little Things That Make a Big Difference with Bill Consolidation Loans
When considering various debt relief companies for bad credit bill consolidation loans, consumers need make sure they look into each program’s specific offerings. Many organizations try to significantly reduce interest rates. Some firms will try to eliminate late fees. A large percentage of debt relief programs will also assess the debtor’s particular credit and debt situation, and make an offer, for free. The customer ought to try to get as much out of your potential lender for free as you possibly can.
If debtors want to break the cycle of bad credit, it is definitely worthwhile to look at options for bill consolidation loans. While they can be difficult to get, they won’t cause further harm to your credit score like other debt relief options can.
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