Credit card debt consolidation is often presented as a cure all for getting debt back under control, even for those with bad credit and greatly overextended borrowing profiles. It is true that sometimes consolidating can be exactly what someone needs, there are also times when getting a loan consolidation won’t actually do much to help the underlying debt situation. If you’re already behind enough on your payments that your credit has taken a hit, getting a consolidation loan may not be easy. It can sometimes be possible, however, and other options are often available that will work well for situations where your credit score is already damaged.
Getting A Consolidation Loan
Consolidation loans generally work best with some kind of collateral, like home equity or a retirement plan to borrow against. You can frequently qualify for this style of lending if you haven’t overextended your ability to borrow already whether your credit score is somewhat challenged or not. If you have a good track record with your local bank, you may want to make a loan request through them before you look into solutions with companies that don’t have such a detailed picture of your financial history.
One thing to be careful about when applying for a consolidation loan with bad credit is making sure that the loan and terms you get will actually end with an improvement. Interest rates go up for people with credit difficulty, so you may not actually save very much money by getting your cards paid off through more lending. Look at any loan offer you receive to make sure that both the monthly payments and the eventual repayment amount land within the limits you need to come out comfortably ahead before accepting the agreement.
Settling Your Debts
If your financial situation is bad enough that potential lenders tell you a loan is out of the question or you can’t get terms that make a consolidation worthwhile, it may be time to consider credit card debt settlement. When you settle with your debtors, you agree to pay back a portion of what you originally owed in a time frame you can handle, often dropping your monthly payments and eventual balance by quite a bit. A settlement may have some impact on your credit, but if your bills are already bringing your score down the net result will eventually be an improvement.
Debt settlement works best in situations where your financial situation is already difficult enough that you are considering defaulting on bills and looking into bankruptcy. At this point, credit card companies will be ready to settle with you for almost anything that can get them some kind of return simply to avoid a total loss.
