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Debt Consolidation Loans for Bad Credit - Know the Facts

Updated on December 23, 2010

If you have a large amount of debt and are looking for a solution, debt consolidation for bad credit may or may not be what you're looking for. You need to look at all of the facts before you make a decision so you can be sure that you are doing is in your best financial interest. There are several options for these loans including a home equity loan, 0% interest credit cards, and debt consolidation. Let's look at each of these so you can make an informed decision.

Debt Consolidation Loans


Home Equity Loans

A home equity loan, like all things, has its good and bad points. If you are a home owner, you can leverage your home's value to get the money you need to consolidate. Another good point is that the interest on a home equity loan is generally tax deductible. However, when shopping around for this type of loan, don't take this for granted. Make sure you check this out before you get one of these loans. A danger in getting a home equity loan for debt consolidation is that your home could be at risk. If you default by not making the payments on the loan, you could lose your home.

0% Credit Cards

A 0% credit card is usually the second choice for people looking to consolidate their bills. It can be a good thing to transfer multiple debts to a credit card with lower interest rates, but there are some drawbacks. The 0% interest rate is usually only for a certain period of time. You need to check to be sure of how long the 0% will last and what your new interest rate will go up to. The rate also only lasts as long as you make your payments on time. If you miss a payment the rate will go up to a pre-specified rate. This is something you also need to check before you make the transfer.

A 0% interest rate credit card can work if you stay on your toes and know the facts. You must make the payments on time and transfer to yet another 0% credit card before the higher interest rate kicks in. The drawback here is that opening new credit card account every six months could affect your credit rating negatively.

Debt Consolidation Loans

Debt consolidation loans have the appeal of convenience. It is so much easier to make one payment then multiple payments every month. If you can get a loan with lower interest rates then you have the added benefit of saving money too. To see if this will work for you, you need to add up all of your payments and interests and compare them to what your payment would be if your consolidated. Make sure it's lower. Shop around - different banks and credit unions will offer you different rates.

By checking out these three debt relief options - home equity loans, 0% interest credit cards, or debt consolidation loans, you can make an educated decision that will help your financial situation the most and get your finances back on track.

Debra Proctor is the owner of, an informative site with articles to answer your most asked questions about credit cards and credit card debt.


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