Bad Credit Debt Consolidation -
What Are Your Options to Red |
By Carrie Reeder |
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To reduce your debt with a poor credit history, you have several
options. While none will solve your credit problems overnight,
they can help you get on better financial ground. A debt
consolidation loan can help you reduce your monthly payments,
while lowering interest rates. A debt consolidation program
services your debt and negotiates lower interest rates. The
final option of debt settlement or bankruptcy pose longer credit
repercussions.
Debt Consolidation Loan
A
debt consolidation loan is either a home equity loan or a
personal loan which is used to pay off your bills and unsecured
debt, including credit cards. A home equity loan allows you to
deduct your interest from your taxes.
With both types of
loans, you can negotiate terms for smaller payments over a
longer period. However, remember that you will be paying more in
interest this way. You also want to make sure that your debt
consolidation loan has lower interest rates than what you are
currently paying.
Debt Consolidation Program
Debt consolidation programs service your debt by negotiating
lower fees with your creditors and administering payments. All
debt consolidation companies will get you the same low interest
rate on bills since this is predetermined by the creditors. The
difference between companies comes from the amount they charge
for fees and their customer service for following through with
accounts.
By using a debt consolidation program, you
prove to creditors that you are committed to paying back your
debts. Within a couple of years, you can have improved your
credit to the point of being able to apply for new credit, even
a mortgage loan.
Debt Settlement And Bankruptcy
If you are several months behind on payments or can't afford
debt consolidation fees, you may want to consider debt
settlement or bankruptcy. With both options, part or all of your
debts are reduced. This is not a choice to be considered
lightly. Your credit will suffer for several years by using
either option. However, if you find yourself in dire financial
difficulties, know you can use these options.
To decide
which option is best for you, take a hard look at your finances.
Ideally, you want to pay back your bills and loans to minimize
any damage to your credit. A debt consolidation loan will
usually have the least impact, followed by using a debt
consolidation program. Using debt settlement or bankruptcy will
stay on your credit history for seven to ten years.
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