Does Debt Consolidation for Bad Credit Borrowers Really Work?
“Wait, you mean I can borrow money to get out of debt?”
Yes…and no. But before that, lets first make sure that we are on the same page. So let’s begin with the basics:
“What is Debt Consolidation?”
Put in plain English, debt consolidation is borrowing from one person to pay another person(s). Typically, this is done when you are able to find someone who can loan you the money you need at a lower interest rate than what you are currently paying.
“How does it work?”
Let’s say you owed a total of $50,000 to 6 different lenders and the average interest rate between them was 25% (not uncommon in today’s market). If you were able to find another lender to loan you $50,000 at a rate of, say, 20% or 15% interest (or even less), then you will end up saving a tremendous amount of money. To learn more, click here.
“I’ve heard of people getting scammed like this.”
So have I. I know that some people disagree, but my rule of thumb is that when it comes to debt consolidation I do not use exclusive DC services but rather, I seek out a lender. And as with all things, you have to perform you due diligence on whoever you are looking to borrow from. In most cases this will usually include looking them up on the Better Business Bureau, web searching for positive and negative reviews
“I don’t have a lot of debt but I do have bad credit, so banks don’t want to talk to me. What do I do?”
I hear you. Even looking for bad credit personal loans for $5000 can feel like banging your head against a wall if are only talking to banks and you don’t have collateral to back it up. I do advise caution here, but an alternative to a conventional lender might be a trusted friend/family member or borrowing from your 401-k (pay it back on time or get hit with awful fees!). But stay away from seedy guys in smokey back rooms who want to “make you an offer you cant refuse”, if you get my drift.
Here is a quick video I found to round things out.
And remember, knowledge + action = power. So if you’d like to learn even more, check out this wiki link.