Can You Consolidate Debt If You Have Bad Credit?

There are 2 answers to this question–“probably” and “yes”.

The “probably” you can consolidate debt if you have bad credit

Two of the most popular ways to consolidate debt is through a debt consolidation loan or by working with a consumer credit counseling agency. In the first case, you would have to find a bank, a credit union or an online lender that would be willing to loan you enough to pay off your debts. The “probably” of this is that while you could most likely get one of these loans, it’s not a slam-dunk. Banks and credit unions are often very leery about loaning money to someone who is already deep in debt. If you can find one of these institutions that would be willing to loan you the money, it will probably be in the form of a secured loan–or one where you pledge an asset as collateral. In most cases that asset will be your house, which puts it at risk if you were to ever default on the loan.

Consumer credit counseling

You might be able to consolidate your debts by going through a consumer credit counseling agency. But this will depend largely on how you’ve been managing your finances and how deeply you are in debt. If you choose to work with a consumer credit counseling agency, your counselor will take a hard look at your finances and your debt. He or she will help you develop a payment plan and then try to sell it to your creditors. They may or may not sign off on your plan, which would put you right back to where you started.

Online lenders

The other “probably” is that you could go online and probably find a company that would loan you the money. This would most likely be in the form of a personal loan. The odds are that it would have a much higher interest rate because the lender is taking more of a risk–there’s nothing that it could seize if you were to default on the loan. You could also find that you wouldn’t be able to borrow more than $25,000 on your signature, which might not be enough to pay off all your debts.

The “yes” that you can consolidate debt if you have bad credit

To paraphrase President Obama’s past campaign slogan, yes, you can–consolidate debt even if you have bad credit. But to do this, you’ll have to have a debt settlement company such as National Debt Relief.

How debt settlement works

Debt settlement won’t work until you’ve stopped paying your credit card providers for at least six months. This is because they just won’t negotiate your until you’re six months behind. At this point, our debt counselors will step in and negotiate your debts down as much as possible. Then, instead of paying the credit card companies you’ll pay us each month. We’ll put your money in a trust that you administer. Once all your creditors agree to settle, and you agree to your payment plan, we’ll use the money to pay them off. You’ll save money – probably thousands of dollars – and be out of debt in 24 to 48 months.

What happens to your credit?

Debt settlement is not for everyone because it will have a negative affect on your credit score. This is because as you read above, you have to stop paying the credit card companies for at least six months, which will definitely ding your credit. However, this will not have as severe an effect as if you had filed for a chapter 7 bankruptcy that would stay in your credit record for 10 years. Plus, with debt settlement you get to keep all your stuff, including those treasured possessions you could lose in a bankruptcy.

If debt collectors are snapping at your heels, let us consolidate your debts. Call our toll-free number or fill out the form on the right side of this page for a free estimate. You’ll be glad you did.