I Have Bad Credit, Little Equity, and a Lot of Debt I Want to Consolidate. – Jason

“Dear Andy,

I have an existing mortgage (130k principle, 140k value)

I have approximately $52,082 debt (Cars, Credit Cards, etc..)

My credit scores as of 7/1 are 554,620,589

Of that $52k $26k resides in 3 creditors hands that have high interest rates (10%+ range). Only having a few thousand in equity in my home and not having a good credit score, what is the best way for me to get these loans conoslodated to a lower interest rate? I am not so concerned about the other $26k as it’s rates are very reasonable (2-5% range).

Jason”

Dear Jason,

It sounds to me like the mortgage is not your problem. If you like the home you’re living in and can afford the payments, this should be your priority. Basically, your mortgage payment is more important than all others and you should set this money aside first.

Next is attacking the other $56k in debt. Start with the vehicles. Can you afford the payments? How much are you really paying for each vehicle that you own? (think loan payments, insurance, fuel, repairs, etc) Is it worth it? Can you do without a vehicle? or find a way to reduce your transportation expenses in any way?

At first this may seem like an extreme sacrifice, but most people are paying way more than they need to for transportation. Buy a used car with cash .. lease a hybrid .. carpool .. use public transportation. Do whatever you can to save as much money as you can on getting from point A to B. The money you save will go a long way in digging you out faster from the other debt you have.

On dealing with the other debt the first thing to do is stop charging anything to those accounts (if you haven’t already). For the time being you’re done with credit, if you don’t have the cash on hand, you don’t buy it. You have no chance of digging out of this debt if you’re also adding to it at the same time.

Based on your credit scores you may find it difficult to find a personal consoldation loan, or find a creditor that will approve you for a credit limit high enough to transfer the balances to a lower interest rate. You may want to contact the creditors with the highest interest rates yourself and ask about any special hardship programs they can offer you. If you’re not comfortable calling the creditors yourself you could always look into a reputable credit counseling group to see if they can help you. I would suggest that you check into AACC affiliated companies.

Good luck and please keep us poted in the comment section below.

Best regards,

Andy is a licensed real estate broker in Massachusetts and is the founder of Northeast Properties in Norton, Massachusetts. His brokerage is designed to help homeowners in today’s difficult real estate market, specializing in short sales. Andy speaks with Massachusetts homeowners every day, helping them to address their questions or issues with short sale or loan modification. He enjoys helping consumers arrive at the correct solution to their problem, and believes that the only way to correctly do that is by presenting them with all of their options in an un-biased manner.

If you have a mortgage, short sale, real estate, or loan modification question you’d like to ask just use the online form. I’m happy to help you totally for free.