How to Get a Bad Credit Debt Consolidation Loan

What are a few viable alternatives to taking out a bad credit debt consolidation loan? Consider finding financing through friends or relatives to tackle utility bills, car payments, past due notices, and student loan payments that must be dealt with immediately. If your parents or guardians don't have cash to provide for these urgencies, you may be able to apply for grants or pay advances from your employer.

Conversely, you can ask creditors to negotiate and reconstruct terms of payments instead of using a bad credit debt consolidation loan to manage your fiscal hassles. Another idea is to use moneys saved up -- either in a savings account or in a semi-liquid account, such as an investment portfolio -- to pay down the interest rates and balances on some of your most pressing bills. For instance, let's say you have $7,000 in your savings account, and you have $6,500 in credit card debt.

You can transfer $6,500 from your savings account to pay down your credit cards. This may only leave you with $500 left in your savings account -- not much of an emergency nest egg, to be sure. But if you ever need to draw on more cash in the future, you can use your credit cards again in emergency.

Let's consider two scenarios. In the first scenario, you maintain your savings account of $7,000 and your credit card past due balance of $6,500 over a six month period. At the end of this time, your savings account may have grown by a fractional amount -- if it grew 4 percent over that time, you will have made $280. However, let's say that your credit card bills grew at a rate of 20 percent -- not uncommon for high balances. Thus, your initial $6,500 debt has been transmogrified into a total bill of $7,800 -- so you netted a negative difference of $1,070.

In the second scenario, in which you have pay off all of your credit card debt, leaving just $500 in your savings account, at the end of that six-month period, you will have gained just $20 (four percent interest on the $500 initially in your account), but you will not have lost any additional money.

Notwithstanding these calculations, you may still want to investigate your bad credit debt consolidation loan opportunities, if only to compare them with other forms of debt remediation.