Your debt has mounted and bills are getting difficult to pay. Because of high unsecured debt and problem or two with payments, you credit score is headed toward the basement. With a consolidation loan, you could relieve monthly financial pressure and start to dig out. The problem is that with your weak credit score, getting a good loan is hard.
Assuming that you have been able to secure a mortgage on your current residence, this would be the first place to look. You have a couple of things in your favor. If you had a decent down payment and have lived in the house for more than three or four years, you should have equity from the combination of the down payment , principle payments, and property appreciation. These may combine to give you enough equity to eliminate your other debts.
The next thing in your favor is the fact that the bank does not want your house. This means that your current mortgage holder will want to work with you to reduce your other debt so that you can continue to pay them for your house. The idea is that your house will continue to gain in value and even if you get into trouble a few years from now, the bank will still have your house to fall back on.
Because of bad credit, your second mortgage or refinanced first mortgage may not have an ideal rate. However, a high mortgage rate is still lower than all but the very best credit card rates. This means that your new or second mortgage payment will be a lot less than the combination of the payments on your other debt. The bank gets more interest from you while acting in its own best interests to keep from foreclosing on your house.
Without owning a home, a debt consolidation loan can be somewhat harder to get. Start the process by trying to find someone who might be willing to help you borrow the money. Just because you are in trouble with a few creditors may not mean that family and friends would consider you a bad risk. They may be aware of extenuating circumstances that have brought you to this point.
Because of your relationship with them, they may actually want to help you. If their financial position is secure, you may have just found your ticket to a consolidation loan. Just make sure that their trust is justified, or this will be a one-time opportunity. If you fail to repay a loan that someone else has cosigned for, it will kill your credit and hurt theirs. They will also end up being the victims that have to repay it.
Additionally, your parents may be in a position to make a loan against certificates of deposit or similar money. This would give you a low interest loan. They could borrow the money in their name.
You sign a promissory note that is a legal document with them. They still get to keep the interest coming in from their certificate. You get the loan proceeds and make the payment to them which they give to the bank. Keep this type of arrangement above board and in writing. This keeps trouble from coming into family relationships. Get a receipt for each payment and keep them until the loan is repaid.
With any type of consolidation loan, it is imperative that you pay each payment on time. This will rebuild your credit and give you a new chance in the future. Avoid making more significant debt until after the new loan is retired. To do this, you will have to change your spending and saving habits. You may even have to take on extra work. Look at this as a new chance for you, and not just a way out of trouble.
