Fortunately, there are ways that you can consolidate your debt without refinancing or taking out a high interest loan. One method that many people with bad credit are turning to is debt negotiation. It involves settling your unsecured debt for less than what you owed by making a one-time lump sum payment. Since only past due accounts are eligible for these types of program, the main disadvantage is it can have adverse effects on your credit. For people with negative payment histories to begin with, however, the sacrifice is far less than for someone with a great credit rating and the potential savings could be worth it if you are unable to pay off your debt anyway.

Another debt relief method that may actually potentially improve your payment history is Consumer Credit Counseling (CCCS). This involves working with lenders to consolidate your accounts, lower your interest rates, and in some cases, waiving late fees or penalties to help a debtor get back on track. Although this option will not be as a positive in terms of a credit impact as paying the debt back in full without third-party help, it is better than bankruptcy or consistently late payments (not to mention you will save on interest and the hassle of multiple checks to write each month).

To learn more about debt management programs simply fill out a form and PayingPaul.Com will forward your information to a qualified company.

What Is Considered Impaired Credit?

In the United States, credit scores range between 300 and 850 points. To be considered sub-prime (the formal credit term for having poor credit), one must generally fall below 650 points. The average credit rating is roughly 675 points. Before the 1990s, having bad credit meant you were not eligible for credit cards, a mortgage, and in rare but more frequent instances, cars. Today, consumers with impaired credit are targeted far more often than before for a wide variety of reasons (although the subprime mortgage crisis changed much of this):

Higher interest charges means more money in the pockets of the banks - Consumers with negative credit histories or bad credit scores are charged interest rates that consumers with better credit would never be willing to take.

With rising home values, some “predatory lenders” were hoping consumers would eventually fall behind so they could seize their property.

What to Watch Out For From Predatory Lenders

Some consumers will read PayingPaul.com and still want a loan despite all of our warnings about the cons of debt consolidation loans. Although we advise against this route, we still feel it is necessary to give those consumers who want to pursue this avenue the information necessary to make sure they are not scammed by predatory mortgage lenders. The following is based on a publication from the US Housing and Urban Development Department (HUD) on tips to protect you from loan companies.

1. First and most obviously, compare rates between lenders and do your homework. This is the easiest way to make sure that you are not dealing with a bank or broker that is dealing in bad faith. Ultimately, your financial welfare rests in your hands, and so it is your responsibility to read the fine print in any agreement and decipher any hidden costs associated with the loan. You will find the information you need in the “Truth in Lending Disclosure Statement” of the loan contract. Some of the most common hidden costs to be aware of: a) pre-payment penalties – this is where you are charged a fee if you pay off the loan ahead of time because the lender loses on the potential interest charges; b) closing costs – these are the fees charged once the loan process is completed and include lender fees, attorney fees, inspection fees, etc. Along the same lines, do your homework on the home’s value and make sure it is line for the median housing price of the other houses in the area.

2. Secondly, beware of any lenders who urge you to overstate your income, down payment or anything else in order to qualify for the loan. Ultimately, the criteria in place to qualify you for a loan are there to protect you. In other words, if your income is only $3,000 per month, saying it is $5,000 to qualify for the larger mortgage will only hurt you in the end. More importantly, lying on a loan application is a federal crime. Likewise, never sign a blank document or a contract with falsified information.