Consolidating debt is a very effective way for people to get out of debt faster, even if you have bad credit. Consolidating debt is a process that borrowers use which combines all of their debts into just a single debt. The biggest benefit to this is the lower interest rate on that one debt and the ability to make just one payment instead of several smaller payments on high interest accounts each month.
There are several ways to go about consolidating your debt. Although it is more difficult to obtain a loan when you have bad credit, it is not impossible. It is important to pay close attention to interest rates when applying for a loan to consolidate debt. You want an interest rate that is significantly lower than you are currently paying, otherwise you are defeating the purpose of consolidating your debt. Understand that the best rates are offered to people with good credit, however it is still possible to secure a loan at a lower interest rate than you are currently paying. This will help in paying your debt down faster.
Another popular method of consolidating debt is enrolling in a debt management program through a credit counseling agency. When doing this, it is important to fully research the company you are going to be working with to ensure they are legitimate. Non-profit credit counseling agencies have trained staff that are able to help you manage your finances better, while setting you up on a debt management plan. Instead of paying your accounts individually, you send one payment to the credit counseling agency who in turn pays your individual creditors. They also negotiate with your creditors for lower interest rates and waived fees or penalties making it possible to get back on track financially.
In the past, transferring high interest balances to a lower interest credit card was a popular method of consolidating debt. Unfortunately in this non-credit friendly era in which we currently live, this is no longer a suitable option for most people. Credit card companies are lowering available credit and raising interest rates making it difficult to find a card that will offer significant savings. This may be a good thing as many people fall in the trap of transferring balances only to run up more debt on the card they just paid off. Whatever method you choose to consolidate debt, it is important to address the issues which got you in trouble in the first place. Avoid using credit in the future and make every effort to pay down your balances in order to reach other financial goals.
