Are There Alternatives to Bad Credit Debt Consolidation Loans? Yes But Not Many

For those with bad credit debt, consolidation loans are often considered the best possible alternative, but contrary to popular belief, these loans aren’t as easy to qualify as one would hope. If you’re already in financial trouble, lenders, even those who specialize in bad credit loans, may be worried about your ability to repay your debt. That may leave you feeling hopeless, but there are a few alternatives to consider.

Credit Counseling: While not the easy solution that consolidation often is, these kinds of services can help you develop a monthly payment plan that does meet your budget. In most cases, you’ll meet with a counselor who looks carefully over your current debts. It’s important to note, though, that not every agency is reputable, so make certain that you find a safe one who will actually work with you to actually get you back on track. Most counseling programs work over a period of four to five years, and they’ll personally help you contact your creditors to lower interest rates and change your repayment schedule to make certain you’re out of debt as the program draws to a close. The real drawback to this method, though, is that the service you work with will report the bureaus that you are a client, and an entry is made on the credit report. That can make lenders wary of dealing with you until you’ve finished the program. Moreover, some creditors may not accept the plan you and your counselor make together, so staying on top of everything is essential.

Debt Settlement: By working with companies who specialize in this field, you create a monthly payment plan that works with your budget. The overall settlement number is determined by the reason you need to consolidate, but in most cases, you’re going to pay about fifty percent of what you owe. If you do make payments as you should, it’s possible to be bill-free in about three years. The drawback, though, comes with the initial hit your credit score will take. Your accounts will be files as charge-offs by your creditors, and while that will damage your score, it can also help you deal with mounting problems now.

Bankruptcy: This is typically a last resort type option, but if you don’t have any other choices, it may be the one to consider. A legal process, you’ll probably want to consult with an attorney if this is the option you choose. You will have to show the court that you don’t have the money or assets to pay for the debts you’ve incurred, and you can expect some pretty invasive records checks before the process goes through. What’s more is that it will stay on your credit report for seven years, and that can mean you have a rough time getting the loans you need for anything from a home to an automobile. This kind of financial management is not advisable unless you’re out of other options.

Consolidating your debt may be a good option, but it’s not always possible. Choices like these, though, do provide a realistic alternative to the problem at hand. Talk to debt consolidation services to see which method of help might be right for you.