What To Do When Credit Consolidation Doesn't Help

Credit consolidation helps people in debt reduce their monthly payments. Consolidation allows you to pay off multiple loans with one lump sum. You receive the lump sum from a new lender, and you begin payments to the new lender. Often, your total principal debt can be reduced, and you will only be responsible for one payment each month, instead of several payments out to various lenders.

When to Enter Credit Consolidation

Credit consolidation is not right for all people who have a lot of debt. First, your debt must be from multiple sources for consolidation to help you. If you are not in debt to many lenders, a better route to credit repair may be debt negotiation. Credit consolidation combines debt negotiation, the process of paying a lower fee all at once, with consolidation, the process of paying off multiple lenders with one loan.

Credit counseling options come in many forms, and these options should only be sought if you cannot repay the debt on your own. Your credit score will not rebound as quickly,  if you receive credit counseling. You stand to gain more by paying off the loans on your own. However, if you simply cannot make multiple payments, credit counseling can save you from bankruptcy, foreclosure or liquidation.

What to Do When Consolidation Doesn't Help

Moving into the services of a credit counseling firm is a last-ditch effort to manage your loans. There are other options to consider if you determine it will not work for you, however. One of those options is a high-risk personal loan.

A high-risk personal loan is extended to an individual with bad credit at a very high interest rate. This loan can be used in times of financial hardship, such as an expensive medical emergency, or to pay off existing loans. If you are using a high-risk personal loan to pay down debt, it is worth your time to negotiate a lower settlement with you debtors in exchange for the lump sum. High-risk personal loans come with the big advantage of the potential to rebuild your credit rather quickly. Making regular payments to the loan will get you back on your feet. There are also large disadvantages, though, such as the expensive price tag and the potential to default and end up in worse shape. Only seek a high risk personal loan if you are ready to apply necessary discipline to pay it off on time.

Considering the Bankruptcy Option 

Many people fear bankruptcy because of the impact it has on their credit record. However, bankruptcy laws are in place to protect people who need a fresh start, free of debt. While it is true that bankruptcy proceedings may result in the seizure of your assets, and many months of headache, in the end, it may be your best solution. In most cases, if you are financially eligible for bankruptcy, it is probably the best solution for your life situation.