Ads for bad credit debt consolidation are pervasive on the television, our favorite websites, and the newspapers we read. Even if you‘re up to your eyeballs in bad debt, these companies weave promises of alleviating your financial pain by consolidating all of the debt you’re drowning in. When all is said and done, you’ll be smiling and living the good life with just one, easy monthly payment! It all seems too good to be true, but is it?
Fortunately for those who fear there is no end in sight, there are consolidation companies out there who wish to help you step out of the quicksand of bad debt. These upstanding organizations will charge you actually humane upfront fees, keep flamboyant claims to a minimum and provide you with professional references to back up their credentials. That doesn‘t mean that everyone is so reliable. Some debt consolidation companies are looking to make a quick buck off the misery of others. This type of firm will feed on your sense of helplessness by offering the light at the end of the tunnel. Sadly, these greedy debt consolidation companies are far more prevalent than those acting as guardian angels.
What Do Debt Consolidation Companies Do?
In theory, debt consolidation companies make contact with your creditors in order to attempt to decrease your interest rates and the amount you pay on a monthly basis. After they‘ve pounded out new terms with your creditors, they inform you of the new, single payment you‘ll need to make each month. You then write the check to the consolidation firm, who will divide it up and disperse it to your respective creditors. But remember, this is just a theory.
In reality, you may be getting swindled. The companies looking to cheat you often take a large chunk of the money you send to them for administrative fees or loan origination fees- even though you haven‘t taken out a loan to begin with. This means that the debt you assumed you were paying off remains high, and your creditors, dissatisfied with the meager amounts trickling in, will continue to report you to credit bureaus and angrily call you demanding more. Not quite the dream you’d envisioned, is it?
Does Legitimate Bad Credit Debt Consolidation Exist?
Thankfully, decent bad credit debt consolidation companies are out there, but the ones who advertise through your email account of late-night infomercials are unlikely to fit the bill. Though it takes some searching, you should be able to find ethical consolidation companies who are just waiting to help you out.
If you’re still not comfortable with the legitimacy of the companies you encounter, there are other options. Though a bank loan may originally seem like a good idea, if your credit is bad, you’ll be hard-pressed to find a bank that will give you an unsecured loan. However, with collateral such as a house or vehicle, you might be able to refinance and find other means of capital. Your banker or mortgage broker can explain the process in more detail. It may also be wise to find a financial consultant who can advise you on ways to manage your budget and avoid a similar spiral of debt in the future.
Another option for consolidating all of your unsecured debt is to transfer the balances of multiple cards to one, low-interest credit card. This plan of action is not without pitfalls. If your credit is truly scraping bottom, the credit card companies could increase your interest rate without warning. It’s important to ask lots of questions so that you understand all of the terms you’re agreeing to. You’ll probably need to dispose of your other credit cards (the scissors are your friend!) to avoid the temptation to run up the balance all over again, putting you back in square one. This will only work if you can commit to paying the minimum on your card every month to bring that balance down. You’ll help yourself out even more if you make the effort to pay off more than the minimum due. No one ever said it would be easy, but where there’s a will, there’s a way.
The bottom line is that the dream of debt consolidation painted by those late night infomercials is attainable. Just make sure you’re working with people who have your best interest at heart.
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