What are the smart ways to consolidate debts with blemished credit report?

After the great economic depression, a large number of people suffered job loss or wage deduction. In this situation, they default on payments as they fail to manage their multiple creditors. They often incur overwhelming debts and complicate their financial situation. If you’re in a similar state, then debt consolidation can be a better option to eliminate your debts with ease. Well, you may not get a loan on favorable terms for debt consolidation, if your credit report is blemished. However, there are other options to consolidate your debts with a blemished credit report.

Here are a few effective methods to consolidate your debts with blemished credit report:

1. Borrow from your 401k account:

You can borrow from your retirement account to consolidate your debts. You’re not required to pay interest when you’re using your own money to pay off your debts. Once your pay off your debts in full, you can resume depositing money in your 401k account. If you withdraw money before you attain the age of 59 years and 6 months, then the account holder can be penalized. But you can easily use the fund to consolidate your debts with ease, when your credit report is blemished. 

2. Apply for secured consolidation loan:

When your credit report is blemished, you can apply for a secured consolidation loan. You’re required to use collateral when you take out a secured loan. So, the interest on this loan is comparatively lower than unsecured loan. However, if you default on your payments, your asset used as collateral can be seized by the creditors. A secured low interest loan can be beneficial to consolidate your high interest debts.

3. Apply for a home equity loan:

If you’re unable to get a loan due to your blemished credit report, then you can apply for a home equity loan. The interest on the home equity loan is comparatively lower than the traditional loans. Before you apply for a loan, make sure you have enough equity in the property.

4. Ask for financial help from loved ones:

You can ask your close relatives or friends for financial assistance. Your loved ones may not even charge interest on the loan. Therefore, it can be easier to consolidate your debts with this new loan. Make sure you pay back the loan on time; otherwise they may not help you in future.

Therefore, you’re required to keep the above mentioned four points in mind when you plan to consolidate your debts with blemished credit report. Once you pay off your debts, you can manage to regain control over your financial situation with ease.