If you are considering debt consolidation as an option for dealing with your consumer debt issues, the chances are that your credit rating and debt/income ratio are sitting at less than ideal levels. In fact, you might be considered to have bad credit. If this circumstance sounds familiar, you are probably wondering how you could possibly secure a debt consolidation load with such poor credit.
Finding Debt Consolidation Options With Bad Credit
There is no point in kidding yourself. Trying to secure any type of loan is going to be difficult with bad credit, especially since the recent recession created so much financial instability, causing lenders to tighten requirements. With that said, there are some options you might want to consider. The challenge is to become as creative as possible and investigate every possible alternative.
Options for Debt Consolidation With Bad Credit
Given your current credit status, you are going to have to accept the fact you may have to accept loan terms that are less than ideal on certain types of loans. The following options are listed in order of preference.
- Home Equity Loan – If you have built-up equity in your home, you may be able to secure an equity loan even with bad credit. The catch is that lenders are going to require you to have significant equity to the tune of 20%-40% of the current appraised value. Given the recent depletion of home values caused by the recession, this might be a difficult number to make.
- 401K and IRA Loans – If you have a 401K plan with your employer or a personal IRA account, there are provisions that will allow you to take out loans against you account balance. The interest you pay is paid to your account and the amount borrowed in only taxable if unpaid within the terms of the loan agreement.
- Secured Personal Loan – If you have other assets such as jewelry, a car with equity, a boat, expensive furniture, stocks/bonds or other financial instruments, you may be able to obtain a personal loan from a finance company. You need to be aware that they will most likely require security in excess of the loan amount and the interest rates may be on the high side.
- Payday Loan In an absolute emergency, you can usually get a payday loan if you have stable employment. Contrary to belief, there are payday loans with terms ranging from 6-12 months. However, these loans carry insane interest rates and the collection process for delinquent loans is very aggressive.
If you would like more information regarding certain types of debt consolidation loans that are available for persons with bad credit, you can contact one of our professional debt counselors at Rescue 1 Financial. They have been trained to assist clients with consumer debt issues and help them secure financial stability.