There are a myriad of reasons your credit may be bad. Perhaps you lost your job, were laid off, or had your pay reduced because of less hours. Illness may have prevented you from working; personal illness or illness in the immediate family may have required you to stay home. Maybe your debts just got out of hand; you maxed out your credit cards or over-extended yourself with multiples loans or mortgages.

If you are feeling smothered by your bad credit or mounting debts, there is hope to crawl out from under the mess you have made of your finances. Debt Consolidation may be the best answer for your current situation.

Debt consolidation can allow you to pay off all of your debts at once. You will then make one payment to each month to your debt consolidation lender. Debt consolidation can be tricky. Plan carefully; a little bit of research on your part can get your credit looking better in as little as a year with debt consolidation.

Make a List

Begin your journey towards freedom by making a detailed list of every bill that you owe. Include past due as well as future due loans, credit card payments, mortgage payments, etc. Make a notation of how much you have paid over the life of each item on your list. Note the balance on each item. Do not forget to include accounts that have been turned over to collections. This list will be the basis for your debt consolidation loan – it lets your debt consolidation lender get a good picture of what your finances look like, as well as the size of the loan you will need.

Decide What to Keep

Depending upon the rate that you are offered in your debt consolidation loan package, you must decide what debts to consolidate as well as which debts you should keep. In general, any account that has been placed with collections should be included in consolidation; this keeps the debt from further damaging your credit report, saves you a bundle in outrageous interest charges, and gets the creditor off your back almost immediately. You should carefully examine current accounts that are not in arrearage to determine if they would cost less over the life of the loan by having them included in your debt consolidation.

Rid Yourself of High Interest Credit Cards

Credit cards are typically top candidates for debt consolidation. Most credit cards have an interest rate that is very appealing when you first open your account; however, if you read the fine print, these rates generally go up within the first year and always increase to the default rate if you miss just one payment.

By consolidating your credit card debt with your other debts, you will most certainly guarantee a cheaper payoff on your credit cards. Just because they are paid off does not mean that you should close your accounts; on the contrary, you should leave one or two of them open. Running small balances on older accounts like your credit card accounts can add points to your credit score. Do not keep over two open cards, however. Too many open accounts (with or without balances) can effect your credit available versus high balance ratio which is one factor lenders use when determining your creditworthiness.

Other accounts you might consider consolidating include your mortgage, personal loans, or student loans. Check each account to see if the interest rate on your new debt consolidation loan is more or less than what you are paying now. If you are paying more on the current account, add it to your consolidation loan to save a bunch of interest!

Author Bio: Devora Witts is a Bad Credit Loan consultant and has more than thirty years of experience in finances. She has helped a lot of people to obtain Fast Unsecured Loans, home loans, car loans and many other products regardless of their credit situation. Learn more about Personal Loans at http://www.badcreditloanservices.com

Category: Finances
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