Bad Credit Debt Consolidation Advice
With the economic slowdown hitting many families hard in terms of their employment prospects or chance of redundancy, there may be many more people than usual who’s credit record goes from good to bad.
There’s a common statistic that most families in Britain are three paycheques short of bankruptcy - that is, if they didn’t have a paycheque for three months, they would find themselves bankrupt, due to the fact that they would have depleted all their savings and used up what little available credit they had available on living expenses alone.
This is sypmtomatic of the culture we live in today, whereby people spend more than they have, running up large debts, and not leaving themselves any kind of safety net. And it’s those that suddenly come across a financial “pebble in the road” so to speak, that tend to become “bad credit” risks.
Fear not though, there are plenty of lenders out there who are still willing to lend, however, the cost of borrowing with bad credit has risen substantially, and the terms the lenders are prepared to lend on have become far more punitive on the part of the borrower.
Here is some simple advice for those who now have bad credit and wish to consolidate their debts:
Be prepared to secure the debts
Lenders will not want to roll up a bunch of unsecured credit card, overdraft and personal loan debt that has gone bad, into another (albeit more expensive) personal loan that is not secured on any assets. Lenders will want some kind of security (your house), and so it is best to consider firstly a debt consolidation loan, secured against the property and lastly a remortgage, such that you pay off the existing mortgage and borrow the extra amount needed to repay the bad debts.
Consider a debt management plan
As you already have bad credit, you may be able to save a lot of money by putting yourself onto a debt management plan with your creditors. You can either set this up yourself, simply draw up a monthly budget showing what you can realistically afford to pay back each month, send copies of this to each creditor and they should agree to reduce interest and accept smaller payments.
Alternatively, you can use a service like the Consumer Credit Counselling Service, who will do all the negotiation with your creditors and ensure that the interest and charges are stopped, setup the debt management plan and administer it for you, so that all you need do is pay them one payment each month, which they distribute to your creditors proportionately.
Don’t panic
Yes it can be very stressful going through financial difficulties (I’ve been through them myself), but take a step backward and ask yourself this question - has anyone died as a result of this? The answer is (usually) no, so it’s not really that bad a situation to be in when you consider that things could be far worse, the problem is that in this country we have an in built fear of being in debt and most of all, not being able to repay it. But think of this, the chances are the lenders shouldn’t have lent you so much money in the first place, so don’t be too hard on yourself.
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