Bad Credit Consolidation Loans

Bad credit consolidation loans are offered to those who have struggled with their credit. The banks appetite for lending to those who have credit issues has lessened since the recession.

In 2005 many banks would finance a consumer who previously filed for bankruptcy, provided they had two years of re-established credit and a minimum credit score of 680. In the past a credit score in the 500’s was considered a bad credit score, however in today’s economic climate, a bank looks at a consumer with a 680 credit score as though they are high risk.

Banks are no longer obliged to give second chances. Banks such as Scotia Bank will not lend to a previous bankrupt at all, whereas some other banks will but only with many, many years of re-established credit.

Those who held on to their homes through the recession may have paid another price, namely their credit. Many hard working Canadians have left this recession loaded with debt and in a position where they have had no choice but to seek some form of debt relief.

No doubt your options will be limited if you have bad credit and need a consolidation loan. Some finance companies like Wells Fargo and Citi Financial, offer high interest consolidation loans (25%-30%) but even they will want to see a good credit score and at least two years of re-established credit.

If you own your home and you need a bad credit consolidation loan or are half way through a consumer proposal you may be able to leverage your home equity to consolidate your debt or payoff your consumer proposal.

There are many lenders who do not have a “retail” presence; you can access these lenders through a mortgage broker. Trust companies will extend equity financing to a customer who has struggled with credit based on the equity in their home. In addition so will some credit unions and private mortgage investment firms. Finally there are private lenders who will offer financing that major financial institutions won’t. Bottom line, a knowledgeable and well-connected mortgage broker is your best course of action.

You can use your home equity by refinancing your first mortgage or by taking out a second mortgage to consolidate your debt. This is also the most affordable way to obtain a bad credit consolidation loan because the interest is much cheaper than the unsecured loans offered by the high interest finance companies.

While customers who are looking for bad credit consolidation loans are finding at the retail level that there are fewer options out there, there are still many lenders who are willing to work with a consumer who has credit issues. The key is that you are taking positive steps towards rebuilding new and positive credit. For more information about bad credit consolidation loans please visit http://www.gtamortgagematters.com/

Bad Credit Consolidation Loans Can be an Expensive Option

If you have accumulated debt that has become unmanageable and you own your home, then you realize that there is a lot to lose.

Bad credit debt consolidation can be very expensive. The banks usually recommend lines of credit as a solution for consolidating debt; only, lines of credit are akin to taking out one giant credit card and bear monthly compound interest.

Some finance companies offer unsecured bad credit consolidation loans, however they bear interest of 20%-30%.

Beware of companies that promote debt consolidations by suggesting that you participate in a program that freezes the interest on your credit products or reduces the amount of debt that you owe. This is often a ploy and leads you to sign up for credit counselling or filing a consumer proposal that will ultimately destroy your credit.

The most affordable type of bad credit loan is a home equity loan. This could be achieved through refinancing a first mortgage or by obtaining a second mortgage. Let’s explore both options.

To consolidate debt, your lowest interest option would be to refinance your first mortgage. Depending on the amount of debt that you are consolidating, refinancing your mortgage will immediately increase your cash flow. Your credit payments will disappear and your mortgage payment will only increase slightly.

If you obtain a second mortgage, the interest will be slightly higher than a first mortgage, however, it will significantly reduce the amount of money you are spending on credit payments.

The ideal way to get the best deal on a consolidation loan is to consult a mortgage broker. Mortgage brokers are knowledgeable about all the different lender products and can often negotiate a lower rate at your bank than you would get if you went to the bank on your own. In cases where the applicant has good credit, the bank will often pay the mortgage brokers fees.

Those who require a bad credit consolidation loan stand to get the most benefit out of a relationship with a mortgage broker because depending on how bad your credit is, mortgage brokers are usually the only way to access a private equity mortgage. For more information visit http://www.gtamortgagematters.com/