MIKE SELVON asked:


Bad credit has reached epidemic proportions in the United States, and as a result many Americans are resorting to bad credit consolidation. Although bad credit occurs for various reasons, such as late mortgage payments or inability to pay school loans, the vast majority of individuals are in trouble due to mismanagement of credit cards.

Being late by even one day can result in penalties, perpetuating the cycle of late payments due to high fees and high fees due to late payments. This inability to manage one’s credit cards can result in overwhelming debt. For many, card debt consolidation is the only solution.
If you have ever encountered the demise of finances due to credit problems, you know that it is a slippery slope. It begins by missing one or two payments. Even if you are a day late on your payment, a late fee charge appears. In addition to this fee, there are always troublesome interest rates that accumulate as the unpaid balance lingers.

When credit problems begin, the down slide is quick. Before you know it, you are in a deeper mess than you ever thought you would be. Most people initially react by making matters worse, reaching out for whatever help they can get quickly, and usually the most convenient help is the preferred choice.

This is often in the form of another credit card. Anyone who follows financial matters knows that using one credit card to pay off another as a form of card debt consolidation is simply a bad idea.

After this cycle goes on for a while, a credit rating becomes awful, making it nearly impossible to have a loan for a car or house approved. Collection agencies may begin making harassing calls, intent on getting you to pay your debts regardless if you have the money or not!

Finally, this is the point where many people choose to pursue a bad credit consolidation. Card debt consolidation simply means that you combine all of your debts, the ones that have snowballed out of control, into one big debt.

The benefits to doing so are numerous. For one, you gain the knowledge that someone is helping you pay your debts. All you have to do is make one monthly payment to the consolidation company and they distribute the payments to your creditors.

Another benefit to consolidating your debt is that your consolidation debt (the final product of the process) is much easier to manage. Your interest rate is low and fixed, while you end up sending out just one payment each month. You will still have debt, but it will be much more manageable. Remember that this can be a very important step towards fixing your financial situation.

Devora Witts asked:


When it comes to consolidating debt, especially credit card debt, a bad credit score or history can complicate the loan approval process. There are, however, many lenders willing to approve consolidation loans for people with bad credit. But are consolidation loans really the solution to avoid bankruptcy?

Debt Consolidation Loans

Debt consolidation loans can drive away the bankruptcy menace because they are meant for easing the weight of overall debt by reducing your monthly payments into a single lower monthly installment. The money obtained from the loan is used for paying off outstanding debt that carries higher interest rates.

When requesting a consolidation loan in order to reduce the amount of money you have to set aside every month for repaying debt and thus, driving away the risk of bankruptcy, you need to make sure you include only all the debt that has higher interest rates than the consolidation loan. Otherwise the whole financial operation would be pointless. Federal student loans, for example, should be set aside since they carry very low interest rates.

Personal loans, cash advance loans, credit card debt and store card debt are the kind of debt you need to consolidate. Only if you are able to get a secured consolidation loan with a lower interest rate should you consider consolidating home equity loans, mortgage loans and mortgage refinance loans. Given that you are thinking about applying for a bad credit consolidation loan, it does not seem probable that you can get a lower interest rate.

The loan length is another important factor, you can considerably reduce your monthly installments by getting a consolidation loan with longer repayment programs, this implies that it will take a lot more time for you to become debt free. However, the monthly payments will be easier to afford and will bring relief to your financial situation. Bear in mind though, that longer repayment schedules carry higher interest rates, so you need to ponder this and find the loan option that best suits your needs.

Which Lender Should I Apply To?

When it comes to choosing the lender, you need to decide first what kind of loan you will be applying to. If you can provide collateral, you will be able to get much better terms on your loan and you should search for lenders dealing with home loans, refinance home loans and home equity loans. These loans carry the lowest interest rates and few credit requirements making them easier to qualify for.

If you cannot provide collateral, then you should find lenders dealing with unsecured personal loans. These loans carry higher interest rates and are harder to qualify for. However they are the only option for non-homeowners or those who have no equity on their home and cannot refinance.

Since unsecured personal loans are harder to qualify for, especially if you have a bad credit score and history, you might get declined for such loans. If that is your case, do not despair, there are debt consolidation agencies that can help you reduce your debt and monthly payments without a loan. They have professional negotiators that will agree with your lenders a reduction on your debt and a new more affordable repayment program.