Bad Credit Debt Consolidation

Having a lot of debt can damage your credit rating at the point where you start missing repayments. If you have consistently missed payments over a long period of time, or if you have had county court judgments (CCJs) filed against you for missed payments, you may find that your credit rating has worsened, making it harder to borrow again in the future. Before proceeding with a debt consolidation loan, you should apply for a copy of your credit file from one of the UK's credit reference agencies (such as Experian, Equifax or Callcredit) so you can see the state of your credit history.

If you already have a bad credit rating, a loan provider may not be able to offer you a much improved interest rate on a debt consolidation loan. The reason is that bad credit debt consolidation loans are often unsecured, and so the lender is compensating for the lack of security , and uncertainty as to whether you will pay back the loan by charging you a higher rate of interest. If this is the case and you desperately need the loan, you should only borrow as much as it would take to clear your highest-interest debts. However, taking out a bad credit debt consolidation loan may exacerbate the problem, so you should speak to a qualified debt specialist before proceeding, to ensure that this really is the best solution for you.

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Alternatives to Poor Credit Secured Loans

• Although a debt consolidation loan can be a great relief in the short-term, taking out a poor credit secured loan to pay off existing debt may make the situation worse.  If you owe at least £2k and have 2 or more creditors, you may wish to consider a debt management plan instead of going down the poor credit secured loans route.  This would involve paying a debt specialist to create a repayment plan by liaising with your creditors on your behalf.  The alternatives would be to use a free organisation, or to manage your creditors personally.  As this is a step before a legally binding IVA (individual voluntary agreement) or bankruptcy, there is less stigma attached, and you would have less trouble obtaining credit in the future.
• Prioritising your debt can make a huge difference to the amount that you need.  Lenders will often encourage consumers to take poor credit secured loans for more than they actually need, giving the incentive of a cash lump sum that you can spend as you choose.  If you can be totally honest with yourself about the amount of money you require immediately, you may be able to scale down from looking at poor credit secured loans to the more manageable unsecured loans, thus saving yourself money and keeping your debt at a lower level of risk.