Bad credit debt consolidation - What are your options?

by Michelle Taylor

If you have a bad credit rating, you are not the only one. There are many debtors that are sailing on the same boat as you are. Every debtor is trying to explore ways in which they can restore their financial well being. It is possible to get a bad credit debt consolidation but you may have to pay a price for having a bad credit history. What is the price?

If you are planning to take out an unsecured debt consolidation loan, the rate of interest you will have to shell out will be higher. Why do creditors charge very high interest rate from debtors with bad credit rating? This is because if you have a bad credit rating, it indicates that your repayment capacity is poor. So, extending a consolidation loan may prove to be risky for the creditor.

The high rate of interest is charged so that it acts as a safety net for the creditors. However, it is quite difficult to get bad credit debt consolidation loan as creditors have adopted very stringent lending norms. As compared to other types of debts, credit card debts have escalated manifold. There are 2 prominent reasons why credit card debts have assumed an uncontrollable proportion.

One of the prominent reasons is that the credit card issuers changed their credit card payment policies and altered credit limits. But the same alterations were not communicated to the credit cardholders. As such the credit cardholders continued using the credit cards as per previous terms and conditions. Soon they started defaulting on their credit card payments.

Another reason that caused credit card debts to escalate was the fact that credit cardholders started using plastic money for making payments for their basic needs too. But these credit cardholders were not able to keep up with the payments. This caused credit card debts to escalate.

So, if you are looking for a bad credit debt consolidation loan, shop around for a creditor that will charge the lowest interest rate. When you consolidate your credit card debts with the help of a consolidation loan, you merge all your debts into a single debt account. This makes your debts manageable. Thereafter, you are required to deal with only one creditor.

Want this delivered to your inbox? Subscribe to my feed.