Debt consolidation can be a great way to get out of debt by combining outstanding lines of credit into a single monthly payment normally at a lower interest rate. There are a number of different types of debt consolidation and there is no preferred option as some types will be more or less appropriate for a variety of people and their particular financial situation. Look at all available options for debt consolidation even if you have bad credit since you never know what you will qualify for or what will work best for you.
Secured debt consolidation loans refer to any loan which is backed by some form of collateral. The most common types are title loans and pawnshop loans since the consumer will be able to provide physical property to guarantee the loan amount will be covered in the event of default. Unfortunately, these types of loans have significantly higher interest rates and risk the loss of personal property. If you need your car to get to work, then the last thing you want is for it to be repossessed by defaulting on a title loan.
Home equity lines of credit are probably the safest and provide the most benefit when consolidating debts even for individuals with bad credit. This is because regardless of the persons credit history, if they own a home which has substantial equity then the lending organization is protected when extending the loan. Not only will you be able to consolidate your debt with bad credit, you also get a significantly lower interest rate than other loan options. The primary risk for default on this type of loan is a lien being placed against your residence and being foreclosed upon as a result.
If you have a stable income and your bad credit does not extend to missed mortgage payments you should be able to refinance your current mortgage. There is a particular type of option when refinancing a home loan which is a cash out refinance. This allows homeowners, which are essentially taking out a brand-new mortgage and paying off the old mortgage, to request an additional cash payout which can be used to consolidate outstanding debt regardless of your bad credit. You may not qualify for refinancing based on your credit history but it will depend on the lender and whether or not your financial problems have negatively affected your current mortgage.
There are many well regarded national debt consolidation agencies and nonprofit organizations which can help individuals consolidate their debts even with bad credit. These organizations work with consumers of all types of credit ranging from very good to very bad with the primary goal of consolidating their debts. The result is to either prevent black marks from appearing at all or to keep credit histories from getting worse than they currently are. Organizations like Consumer Credit Counseling contact all existing lenders looking to consolidate lines of credit into a single monthly payment with significantly lower interest rates.