What debt consolidation options do I have if I have bad credit and a mortgage?
Aside from using traditional debt consolidation methods such as debt consolidation loans and debt management, you can take care of your debts if you have a mortgage. And in some cases it doesn’t matter if your credit is good or if it is bad.
How this works is you put the equity of your home to work for you. When you refinance, you are able to refinance the amount of your mortgage plus the equity you have built. With equity, you are able to receive that in cash. Many individuals do this when remodeling their homes or reaching some sort of goal in their life. In this case, you are able to use it to pay off your debts. In other words, you pay off your debts with that money, but you pay off that amount of money through your mortgage payments. This technically throws everything into one monthly payment.
As for your bad credit, there are certain things working for you and against you. For instance, you may not have a satisfactory payment history on your mortgage payments. You are not in foreclosure, but your payments are made sporadically. This can be seen as a risk by the bank or other entity refinancing your mortgage. It is then up to them whether or not to refinance you. They may decide not to.
However, you may show a satisfactory payment history with your mortgage, although you do not with anything else. This increases your chances of being able to refinance your home and get your credit in order. Even if one lender rejects you, you may possibly be able to secure refinancing through another lender. Just keep in mind that your current credit rating will have an impact on the interest rate that you secure. You may have a lower rate now if your mortgage is at a fixed rate and you had good credit when you acquired it. If your credit is not good now, your interest rate will be based upon the current standards, so you have to look at this to determine how much consolidating your debts through mortgage refinance will cost you.
If you find you are unable to refinance your mortgage, you do have the option of working with a debt management company to negotiate your debts with your creditors. They will negotiate lower payments and interest, which will help you pay an affordable amount each month without accruing more fees and interest. Â This can result in your debts being paid off faster. You also have the qualifying debts paid each month with one lump sum payment. However, you must remember that the debt management includes their own fee for the work that they do for you each month.
Lastly, you can always seek out an informal arrangement with creditors. This too can be taken care of through a debt management company. However, this is idea for someone not facing a lot of debt. This is because it is harder for an informal arrangement to stand if there is a lot of debt. Although a lower rate has been negotiated, this sort of agreement is not binding, so the creditor can withdraw out of it at any time.
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