Debt consolidating loans bad credit
One of the biggest pitfalls of debt consolidation is the risk of running up new debt before the consolidated debt is paid off.
When you finish paying off credit cards with a consolidation loan, don’t be tempted to use the credit cards with their newly free credit limits. You may have heard that doing so could hurt your credit score, and it might.
They may simplify your payment without significantly lowering your cost of debt.
A great way to consolidate debt, especially if you have bad credit, is to enroll in a debt management program, which we’ll discuss in a moment.
The truth is that having any debt means you are financially beholden to a creditor and you can’t put your money in your own pocket until your obligation is met.
The best debt consolidation solution is one that simplifies your financial life or lowers your cost of debt, or both.If you want to pay off debt fast, the best way is a two-pronged approach: Debt consolidation means taking out one new loan large enough to repay some or all of your outstanding debt.You get the money, pay off your accounts, and then make a single monthly payment to pay off the new debt.At that point, the delinquency stops affecting your credit. Your credit suffers tremendously in the meantime, and since you’re still legally obligated to pay the debt, a debt collector can pursue you until the statute of limitations runs out in the state where you live.
Which strategy will ultimately be the best choice for you depends on your own circumstances, and we can’t tell you what to do.
In reality, credit card debt forgiveness is rare and tricky, and can be very costly. Then you have to convince your creditors that you don’t have the means to repay your debt and your situation isn’t likely to change.