Even with Bad Credit, Here Are Six Debt Consolidation Moves You Can Make

With today's tighter lending standards, people with bad credit may feel shut out from making any debt consolidation moves. After all, the ideal form of debt consolidation is to funnel higher-cost forms of debt, such as credit card debt, into lower-cost debt such as a mortgage. With the mortgage market now all but closed to people with bad debt, this debt consolidation option may be more limited, but here are six moves you can make to get better control of your debt.

1. Budget to stop the bleeding. Separate your finances into two tasks. Job one is to stop running up debt, and job two is to get control of the debt you have. Debt consolidation is like running against the wind if you are continuing to pile up new debt. If you are living beyond your means, then change your lifestyle today. The reward will be that any debt consolidation moves you make will feel like real progress.
2. Credit card debt consolidation. Even if you can't get the balances off your credit cards, one debt consolidation move you can make is to line those cards up and see which has the lowest interest rate. If there's a meaningful difference, funnel your balances toward that lowest rate.
3. Monitor your credit cards. Once you think you know which card has the lowest rate, keep your eye on your statements. Credit cards can change interest rates quickly, so make sure you are not working on outdated assumptions.
4. Make tactical use of credit card offers. Since debt consolidation is largely about moving balances from higher-cost to lower-cost forms of debt, make tactical use of any new credit card offers which guarantee very low terms for a fixed period of time. You'll want to be careful about this--cherry pick only the very best offers, and be sure to close some credit card accounts as you open up new ones, because simply adding to your number of accounts can further damage your credit rating.
5. Hold onto Your Car Longer. One of the nice things about a car loan is that unlike a mortgage, it is usually something borrowers can foresee paying off in the reasonably near future. During better times, people got into the habit of simply rolling one car loan into the next one so they could get a new car every few years, but see what an impact it will make to hold onto a car longer. Once your car loan payments are finished, simply take that same amount and put it toward paying down other debts. Now you'll be making real progress.
6. Talk to Your Mortgage Lender. While your credit may be bad, your current lender has already taken you on as a risk. They may not extend you any more credit in a refinancing, but if you can lower your interest rate or lengthen the loan term, you'll free up more money to pay down credit card debt.

Overall, the point is that there are different forms of debt consolidation, and over time you may make a series of debt consolidation moves. So, even if you have bad credit, look for those debt consolidation options that are still open to you, and view these options as part of an ongoing debt management strategy.

About the Author:
Richard Barrington has been a businessman and writer for a quarter century. Shortly after graduating Magna Cum Laude from St. John Fisher College in 1983, Richard joined Manning & Napier Advisors, Inc., a Registered Investment Advisor. Starting in an entry-level operations position, he worked his way up to become head of marketing and client service, an owner of the firm, and a member of its governing Executive Committee. His efforts contributed to the firms growth from slightly over $1 billion in assets under management when he joined, to over $12 billion in 2006. While at Manning & Napier, Richard earned the Chartered Financial Analyst (CFA) designation from the Association of Investment Management and Research (now the CFA Institute").

In August, 2006, Richard retired from the investment business to pursue a writing career. He has worked primarily as a freelance writer on a variety of business topics, while also writing manuscripts for three books.