Consolidating debt with bad credit
To understand why, consider the difference between your mortgage and your credit card.
The mortgage is a “secured debt” and the credit card is “unsecured debt.” That means if you stop paying your credit card bill, the lender cannot automatically take any property (or collateral) from you as a penalty.
That can lead to a domino effect where you miss payments, your interest rates get raised, and then you can’t stay above water.
A consolidation loan can sometimes lower your monthly payment, and that can give you enough breathing room to get back on track.
3) Confusion because of too many bills Another common obstacle to getting out of debt is when the sheer number of bills you receive makes it hard to even keep track of which payment is due on which date. While there are some real benefits to debt consolidation, it’s extremely important that you do your homework and understand there’s a wide range of options when it comes to debt consolidation loans – some are good, some are bad, and some are downright predatory.
Consolidation can help with this problem by reducing the number of bills you get down to a single one. Check your rate using Ready For Zero's free debt consolidation tool.
If you miss a payment or even make a late payment, you will often lose the introductory 0% interest rate and will instead have to start paying interest immediately.The fees and interest rates can end up being very high – especially if you have fair or poor credit.Since most people struggling with debt do not have excellent credit scores, they’ll have to pay high interest rates and fees which will burn a large percentage of their total cash flow each month. Furthermore, even if you get what seems like a good interest rate, there is still a significant risk involved in dealing with a debt consolidation company.However, you must be cautious when dealing with debt consolidation companies.Once you have agreed to the debt consolidation plan, you can’t go back, so it’s important to understand the potential consequences first.