Bad Credit Consolidation Loans

If you type "bad credit consolidation loans" into Google, your first thirty or so matches will link to the site of some consolidator company promising that a quick fix is just one easy payment away. The world is rife with vultures that prey on the needy and vulnerable. There are several bad credit consolidation loan myths that people fall for.

The biggest myth is that it is easy to get such a loan. If you have bad credit, this is not the case. You may be misled by the promises of an easy loan and end up getting charged as much as 22 percent in interest. Ultimately, you will be paying more money if you choose a consolidation loan and have bad credit, even though your monthly payment will be lower.

Another myth is that companies that swear they will take care of everything are for real. Most debt consolidators include a fee in the monthly payment, usually around 10 percent of it. Then, they transfer the payment to your creditors and get back up to 15 percent more because the creditor feels indebted to them and rebates. In reality, you can negotiate lower rates and terms yourself by calling your creditors personally and making an arrangement. You do not need a vulture company to do that for you. Use online money debt consolidation calculators - you will find that they are just as good as the advice you can get from one of these companies. They are even better because they are free.

Some consolidators make late payments to your creditors on purpose. This practice hikes up the interest and incurs penalties, from where it follows that you will owe more money, including to them. Sometimes, they flat out miss payments. For obvious reasons, this will inevitably worsen your already poor credit record.

There are many wiser things to do than take out a bad credit consolidation loan. These include taking out a home equity loan, doing a "cash-out" refinancing, refinancing your car and, best of all, negotiating better terms with your creditors.

If you are still looking into bad credit consolidation loans, they may help you structure your credit card debt, student loans, automobile loan, etc. into one single loan. This new loan is used to pay off your financial obligations to creditors. The borrower of the loan owes debt only to the debt consolidation company.

However, bad credit is not as bad as it sounds. First of all, your credit score varies from one credit bureau to another because they are supplied with different information. This score is affected by the regularity of your credit card payments or loan repayments, your credit limit, the debt against it, and a variety of other factors. You can work on all of these. The score is not the only aspect that affects a prospective lender's decision. In modern times, clients with dents in their credit history (even people who are over three months behind on their payments) can get credit access.