It seems that today everyone is having problems with their finances. Job cuts, furloughs and a weak economy have caused people to look into bad credit debt consolidation to cut their monthly bills. What is bad credit debt consolidation? It is the consolidation of debts when you have less than stellar credit. This practice is also used when credit accounts have entered into collections and are growing balances of over $6,000.
The premise of bad credit debt consolidation is to combine multiple debts into one loan. This gives the consumer a single month payment and a fixed interest rate. While this package seems like a great way to get rid of bad credit, there are many strings attached. Here are the “strings” you need to look out for.
People who are poor at money management often use bad credit debt consolidation. They open new accounts and get themselves right back in the same situation after they seemingly clean up the mess. The reason they start a bad credit debt consolidation program in the first place is to reduce expenses to get out of debt, not to add more debts. This vicious cycle often drags people into bankruptcy.
So, how can you use bad credit debt consolidation to cure your money troubles? First things first, you must realize that this is not a quick fix that will get you back to spending money you don’t have. You have to change your habits to living within your means.
Another string you have to look out for is shady financial counselors. Without a trusted, reputable advisor, you will have trouble managing your debt. It’s important that you have someone who can give you objective feedback and won’t charge you out the ears for their services. Check with the Better Business Bureau on any adviser you approach or who approaches you.
The last string you need to watch out for is what a bad credit debt consolidation lender requires you to put up as collateral for your consolidation loan. They often require personal property, namely the equity in your home if you own one. This is a dangerous thing to do because you can lose your home if you default on the loan. It’s important that you explore all options before pursuing this type of loan. That’s where your adviser comes in.