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Bad Credit Debt Consolidation - Credit Optimization Strategies

As a “standard” American citizen, your household has a debt of about $14,500. 40 percent of American families admit they annually spend more than they earn and the situation in other developed countries is not very different. What to do in order to reduce the debt and accelerating the process of paying off debts? The clue to this is called “Bad Credit Debt Consolidation”.

How does Bad Credit Debt Consolidation work? The most effectively used way is to consolidate your debt in a single low-interest loan. This can save on interest payments and speed the process of paying off debts.

If you get a considerably cheaper short-term bank loan or you can achieve a mortgage refinancing or a home equity loan, you save a lot of money and will be able to pay back your debt faster or even at once. As a first step you should consolidate all of your short-term debts into one loan in order to reduce your debt load. Start with your credit card debt as you usually pay a much larger interest rate than even with an unsecured loan from a bank.

But this mechanical process alone won't save you if you don´t change your consumer behavior and money management in general. Statistics show that more and more people forgot this golden rule of money management and are sliding deeper and deeper in the dept swamp, unable to get out of it as each movement even reduce them deeper in the jam.

Ideas and recommendations you might consider to start with for successful and sustainable Bad Credit Debt Consolidation:

• Stop spending - -> Stick to your Budget!  (reduce unnecessary spending and impulse purchases, reduce eating out, avoid clip coupons, don't purchase generic products at the supermarket, and avoid impulse purchases. Above all, stop using credit cards. Investigations show that credit card debt is the biggest problem in our modern society as most people loose control over their money management with this plastic cash.

• Renegotiate the payment terms with your primary lender - explaining your economic problems you might get a stretch out of the payments.

• Talk with your partner and family about your financial problems in order to evaluate possible solutions. In some cases you might be able to borrow money from a family member to pay off debt, in other cases this might be impossible as you already did this several times and you still didn’t pay off this debt. The advantage of a family loan is that you usually don’t need to pay interest and you can use the money to pay off debt with high interest rates. The disadvantage is that you run risk to destroy the relationship if you don’t pay them back. As an advise, just get it all in writing and define your monthly pay off rates. Borrowing money at zero interest is by far the easiest way for Bad Credit Debt Consolidation.

• Go to your bank and other banks in your town and ask about possibilities to refinance with a home equity loan or home equity line of credit. Also ask about possibilities to transfer balances from one credit card to another (offering better conditions). You might ask help from credit counselors, debt negotiators or debt settlement specialists, to name a few. Be aware that these services sometimes cost quite some money and could make matters worse.

• Credit card transfers - check out for banks offering credit cards with cero or a very low introductory rate. Many people are "surfing" from one credit card to an other one in order to avoid the payment of interest. However, this option can be quite stressy as you need to change your credit time before your are getting charged.

• Life Insurance - Take into consideration the possibility to borrow money against the value of your whole life insurance. The only risk in the case you are not able to pay it back is that the amount of the loan is deducted from the benefits paid to your beneficiaries.

• Home equity Loans - A home equity loan or line of credit allows you to borrow money, using your home's equity as collateral. Be very careful with this option!! With a home equity loan or line of credit you can lose the home and be forced to move out if you don't repay the debt. The advantage of Home Equity Loans is that they are inexpensive, relatively easy to obtain and that they may offer a tax deduction for the interest portion of the loan.  

• Join a Credit Union - Credit Unions generally offer lower interest rates and fees on loans compared to other credit institutes. A frequently used approach for Bad Credit Debt Consolidation.

• Borrow from Retirement Fund - consult with a financial planner before considering borrowing from your retirement fund as some plans will require you to suspend 401(k) elective-deferral contributions for a certain period after you receive a loan from the plan. There are several more disadvantages.  If you do not pay the loan back within five years, the IRS will assess taxes and penalties. Also, if you quit your job, your employer will call the loan in full when you leave.  

•  Increase your Income with a work at home job - A proactive way to reduce your debts is looking for some additional income. Think about skills and knowledge of yourself, your partner and family members and start looking for a home business that does not require big amounts of venture capital. You will be surprised how many opportunities are around to make some extra money. A good starting point for your financial freedom is here.

•   Need Help? Check out the internet in order to compare Credit Repair Programs and Bad Credit Debt Consolidation Services. Be taking a decision you should investigate and evaluate at least three different companies in order to find the most appropriate service for you. In the following we recommend proven providers with high reputation you might consider as starting point. Signup and advise usually is free of any charge and compromise.

Recommended Resources offering Credit Repair Programs and Bad Credit Debt Consolidation Services: