The “Bad Credit” Loan Blues … Is this your song?
- Frequent calls from bill collectors
- Cash advances from one credit card to pay off another
- Not making your loan payments on time or missing them
- Paying just the interest or less than agreed upon
- Continually falling behind on monthly bills
- Inventing new excuses of why you can’t pay your debts
Feeling lost in the Bad Credit Loan jungle? Trying to find your way but don’t know where to look? Your escape route starts here with a roadmap to debt consolidation that will help you gain lost financial control and could even help save you money.
Sub Prime Debt Consolidation
Debt consolidation can best be described as the combination of several small debts and regular monthly payments into one debt and one monthly payment. Usually, one monthly payment can be less than the total of all your current bills. You don’t have to pay out the same amount of cash as you did before and repayment of your loan once a month is more convenient. An additional upside to this form of financial management is that it can help you re-establish your credit providing you make all your payments on time, every time. Reducing your debt faster by making a larger payment than negotiated helps even more. It demonstrates to lenders that you are serious about your responsibility to reduce your debt load and reestablish your credit.
You are not alone
It has been estimated that 25% of the population in the U.S.A. falls into this category of bad credit/impaired credit classification. The price a borrower pays for this label is; the lower the credit rating, the higher the cost of borrowing. Because of the potential risk involved, there is also reduced access to lenders willing to take a chance and lend you money. Not a pretty picture to say the least. But just as there are always borrowers, there are always lenders to do business, at a price.
Drowning in debt
The need for debt consolidation is usually a self-inflicted wound. If you were able to manage your debt load and pay off what you owe, you would not be in a difficult position. The fact that you are suggests that you don’t have the “tools” to keep your “head above water”. You need help to get out of debt. You need behavioral modification and a follow-up action plan. Consider the following:
- Reasons for bad credit including bad money management
- List monthly income and expenses to determine how much you can afford to pay in a bad credit loan
- Contact your bank or credit union (a lending institution that knows you) to determine what you need to get out of debt.
- If needed, find a co-signor to guarantee your loan payments
- Try a Debt Consolidation Service but shop wisely
Debt Consolidation Services
Many companies supply this service while sourcing lenders at competitive rates. They shop around on your behalf. Financial institutions including banks, credit unions, finance companies, and insurance companies are all polled to find the best fit at the lowest rate of interest for you and your debt load.
Remember that this is a business and there are things you need to know before committing to any long-term borrowing. How much do they charge for their service? Do you pay “upfront” or upon completion of the loan? Maybe they will charge a flat fee or a percentage of the total loan? These are all important questions to ask.
A list of satisfied customers is a good place to find out how reputable the service provider is when dealing with their clients. Membership in the Better Business Bureau is another indication of professionalism.
Finally, ask for a list of lenders they deal with. More means better while less generally means they are interested in working with just one or two lenders for their own profit. Do your due diligence!
Returning to good financial health can be a painful process. However, once achieved, you will enjoy greater peace of mind. Well worth the effort!
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