If you are looking for a bad credit debt consolidation loan for people with a poor credit rating or credit history, you are typically looking at paying 47% interest; however, there may be a better way for you. There are companies and organizations who offer programs that consolidate all your debt payments into one monthly payment and provide substantial interest relief. Going this route is not always fast or easy, but if consolidating your debts and outstanding bills this way makes sense for your situation, it can be very effective and can actually be one of the quickest ways of helping you get out of debt.
To identify and deal with the underlying problems that are causing your financial problems, your first step should be to contact a non-profit Credit Counsellor and have them go over your finances with you. After they've helped you identify the problem, they can recommend the best solution based on your situation and your financial goals and priorities. Their help combined with the right solution and your determination to see it through should result in a very effective cure to what you're going through.
Some Tough Questions You Need to Ask Yourself
Before we go further, though, there are some questions you need to honestly ask yourself. Is a loan really the best thing for your situation? Is it truly what you need, and will it actually help? Are you dealing with your situation, or are you just prolonging the pain? Is it possible that a loan will only be a short term fix to a longer term problem that’s been brewing? Have you considered the possibility that instead of being an easy solution, a bad credit debt consolidation loan could increase your cost of living, put you further behind the eight ball with high interest payments you can hardly afford, and hurt you?
Don’t be too quick to rush into something that may end up hurting you and possibly causing more harm than good. It’s important to know your options. Consider getting advice from someone who is knowledgeable about how to deal with bad credit – a professional who doesn’t have an interest in selling you an expensive loan.
What you need to do is deal with the underlying problem that’s causing financial issues. Find the cure. Don’t just extend the pain.
Your Best First Step
Your first step should be to see a local non-profit Credit Counsellor. They will go over your entire financial picture with you, help you put together a budget to make sure all your bills get paid, and help you work out what your best options are to get your finances back on track. When it comes to turning around situations like this involving poor credit and financial challenges, you can’t just apply one “solution” to all people. Everyone’s situation and history are unique. That’s why it’s so valuable to sit down with an expert, go over your situation, and explore all your options.
Ways for People with Bad Credit to Consolidate Debt without Getting another Loan – Interest Relief Programs
While there are many ways to help people with a bad credit rating address and resolve their situation, there are couple of innovative options that many Canadians aren’t aware of. Non-profit credit counselling organizations offer an interest relief program called a Debt Management Program and bankruptcy trustee companies offer a repayment plan called a Consumer Proposal.
If you choose to sign up for a Debt Management Program, the credit counselling agency you work with will contact your creditors and arrange for all your unsecured debts to be put on the repayment plan (it’s not a personal consolidation loan, but it effectively accomplishes the same thing). All your payments are then consolidated into one monthly payment that you can afford, and your interest rates are either eliminated or massively reduced. If you also have any secured debts, the Credit Counsellor will work payments for those debts into the program so that you can afford to make them every month.
On average, the program lasts two and a half years (the maximum length allowed is five years), and the credit counselling agency can work with you to rebuild your credit once you have completed the program. Some credit counselling organizations even have a program to rebuild your credit that is available as you near the end of the repayment program.
If a Consumer Proposal makes the most sense for your financial situation, a Credit Counsellor will refer you to a reputable bankruptcy trustee in your community. The trustee will then contact your creditors and see if they can get them to agree to allow your debt to go onto the program. If the majority of your creditors agree, you’ll then repay a portion of your debt over period of time. Most programs take 4 – 5 years to repay (five years is also the longest this program is allowed to run for).
The biggest advantages of a Consumer Proposal are that the payments are designed to be affordable, interest is eliminated, and the amount of debt you owe is reduced. Like the Debt Management Program, a Consumer Proposal impacts your credit. However, the effects of a Consumer Proposal last longer and include a public record that a proposal was filed with your creditors.
What to Do if You’re Struggling, Have a Poor Credit Rating, & Really Need a Debt Consolidation Loan
If you’re really struggling with your debt and need help fast so you can pay your bills, don’t simply extend the pain by applying for an easy bad credit debt consolidation loan. Before you approach one of these companies, first contact an accredited Canadian non-profit credit counselling organization, find out what all of your viable options are, see if any of the interest relief programs for people with a poor credit history mentioned here make sense for you, decide on your best option, put together a realistic plan with the Credit Counsellor, and then follow it and get your finances back on track. If a loan to consolidate your debts is a good option, the Counsellor will point you in the right direction. The really nice thing is that non-profit Credit Counsellors usually help people for free and their help is fully confidential. They’re not there to judge you. They are simply there to help. You really have nothing to lose by talking to them – except, hopefully, your bad credit rating and your debt.
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