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Consolidate Bad Debt....and Then What? -Then you stop spending money hand over fist, and start taking an objective look at how you have been managing your personal finances.

Debt consolidation loans are often the only way to clean up your high interest debt(s). Combining all of your "bad debt" is a very smart thing to do, and every bank, credit union, and private lender will tell you the same thing. However, there are some aspects of a consolidation loan that must be understood.

Perhaps someone in your family has recently been ill, or you have just gone through a bad divorce, or you have recently become unemployed - these things happen in life and it may be no fault of your own. The question you have to ask yourself is;

"Why didn't I save some money every month when times were better - when I had a good job and relatively low expenses".

Regardless of the reasons for having out-of-control debt and growing interest, borrowers want to find a way to consolidate all their high APR debt, and start all over. Sound great, but it's now that easy to get approved if you don't have a long stanging job, and good credit rating, a co-signer, home equity, or some form of security. An unsecured loan is not always easy to get approved.

However, if you are gainfully employed you will eventually find a lender willing to make some profit from your high interest payments, or a debt consolidation company that is willing to negotiate with your creditors pennies on the dollar in repayment. The latter involves pooling all of your creditor debt into one lump sum payment over a period of years, in monthly or biweekly installment payments.

Once you ARE approved for some form of debt consolidation plan or loan, make sure you change your spending habits and earning habits. Find ways to live within your temporary means, and find way to earn more each month. Sounds easy right? I know it's not, but if you start with baby steps, you will find out that in time you can change your spending habits.

Make Sure Your APR is as Low as Possible - You don't have to settle for a high interest rate on your consolidation.

Banks and private lenders make a great deal of money off every customer/client that is approved for consolidation financing, when those customers successfully make their monthly or biweekly payments until the final termination of the loan term.

You should never just except the first interest rate a lender offers you - you need to shop around and do business with the fairest lender you can find. Patience is a virtue as usual. It likely took you years of over-spending and under-earning to accumulate all your high interest debts, so you can afford to take your time to seek out the lowest APR possible.

Even when you are sitting in a loan officer's cubicle or office, and it looks like you are going to be approved, stop, take a deep breath, and take the loan agreement to a third-party lawyer to read over. Sounds "nuts" perhaps, but a bad loan deal will cost you much more than the small fee charged by a lawyer to protect you.

Consolidation for Credit Cards - Lower Loan Principal

The usual suspects when it comes to debt consolidation relief are credit cards. Credit card interest rates are bad enough when the APR is between 16% - 19% - but when there are rate hikes as high as 30% you are quickly in deep trouble (and deep debt). Some CC companies offer low rates for a limited period of time, and then they hike the interest rates up into the stratosphere - be aware of these kinds of predatory credit card companies by reading their CC client agreement.

Department store cards and gas station cards are also troublesome, because the interest rates are very high from the first purchase. Department stores (and the like) learned decades ago (60's - 70's) that they can make more money from financing your purchases than the markup on the actual products they sell you.

Consolidation of Vehicle Loans, LOC, and Mortgage - Higher Loan Principal

The higher level consolidation loan is one whereby you pool larger personal debts into one very large amount. With this type of relief you are combining vehicle loans, unsecured lines of credit, home mortgages, medical expenses, etc. These loans can get very high in the principal amount - often reaching hundreds of thousands of dollars. This kind of consolidation is usually carried out prior to a personal bankruptcy, or Chapter 13 proceedings, and usually involves the use of a debt consolidation company, employing a structured settlement of some kind (paying back pennies on the dollar).

Real Borrowers Requiring a Debt Consolidation

At CLF, we publish the consolidation requests of actual borrowers who are seeking a debt consolidation loan, and most importantly we can see WHY they need a consolidation. The personal information is changed to protect the privacy of our submitters.

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