Can I Consolidate If I Have Bad Credit?
Understandably, people struggling with large amounts of debt also tend to have poor credit scores. The excessive interest rates of unsecured debt often lead to late payments and delinquent accounts, both of which take a serious toll on credit scores. Mistakenly, many consumers in this predicament believe that they cannot qualify for debt consolidation solutions because of their credit challenges. However, there are bad credit debt consolidation programs that will accept virtually all consumers in spite of their credit woes. Read on for additional information on bad debt consolidation.
Qualifying for Debt Consolidation
Most debt consolidation programs have qualification criteria, but they don't necessarily preclude consumers with poor credit. You can still become free of debt through professional debt consolidation as long as you meet the following criteria (will vary by debt consolidation service):
- Your debt is unsecured. Online debt consolidation companies usually only allow unsecured debt to be included in the consolidation process. Unsecured debt is debt unattached to a piece of collateral (e.g., house, car, etc.).
- You have less than $20,000 of debt. Debt consolidation solutions tend to work best for consumers who have $5,000-$20,000 of unsecured debt. Consumers with higher levels of debt may be better served by alternative debt solutions.
- You are not seriously delinquent on your accounts. To qualify for bad credit debt consolidation, you cannot be more than three months behind on any of your accounts. Accounts that are in later stages of delinquency are more difficult to consolidate.
Consolidate Debt Loans
If you have credit challenges, you will most likely be unable to qualify for debt consolidation loans, which are an alternative to professional debt consolidation solutions. Debt consolidation loans usually require the borrower to have good or excellent credit, especially for loans with affordable interest rates. For example, poor credit may prevent you from qualifying for debt consolidation home equity loans or personal consolidation loans. If you cannot qualify for these kinds of debt solutions, you still have a good chance of qualifying for a professional debt consolidation program.
Bad Credit Debt Interventions
For consumers who are seriously delinquent on their accounts and/or have too much debt to qualify for traditional debt consolidation programs, there are other options. For one, you may be able to consolidate debt through a debt relief settlement or debt negotiation. With this option, your debt consolidation service negotiates with your creditors in order to arrange a payoff amount to settle your debt. Most consolidation services offer this intervention for clients with serious credit problems.
Alternatively, consumers for whom bad debt consolidation does not work may consider bankruptcy. If you have high levels of debt, seriously delinquent accounts, and have exhausted all other options, bankruptcy may be the best way to become debt free again. Bankruptcy will have a powerful negative impact on your credit score for several years, but you will be able to start fresh, free of debt, and begin rebuilding your credit immediately. Before you declare bankruptcy, make sure you discuss your options with a debt management service or non profit consolidation company first.
