These lenders generally specialise in making bad credit loans that are substandard by normal banking criteria, and that traditional banking community passes up because borrowers' previous credit is poor or there is not enough collateral.

Since these lenders make these substandard loans, financial regulators allow them to charge much higher interest rates than regular banks can charge.

Though these lenders make bad credit loans other lenders won't touch, each has its own acceptable criteria. One major advantage of using alternative sources of capital is that they may make you a loan when no one else will. And, of course drawback is that you will pay a very high interest rate for privilege of borrowing.

Interest rates on bad credit loans can be higher than other personal loans because of perceived risks to lenders, but they are a readily available alternative source of funding for people affected by poor credit ratings.

Banks may be more selective of their loan applicants. Since banks tend to be more cautious of their investments, they are less likely to offer loans to those with bad credit ratings. You might need to prove that you can repay loan.

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Determine all sources of income.

Face up to how much you owe.

Determine which bills are essential and which are avoidable.

Quit charging and apply extra cash to reducing balances.

Find ways to generate extra income. Cut back on nonessentials.

Track spending.

Seek financial counselling.

Call your creditors to see if you can work out some change in monthly payments that will ease pressure.

If you do decide to consolidate your debts, shop around for best deal.

Before you choose whom you will get loan from, find out following information from each place:

The charge for service. The annual percentage rate (APR). The amount of your monthly payments.

How long you must make payments.

What total amount is that you will pay.

What happens if you miss a payment.

What happens if you are late making a payment.

Making only one payment a month may make you think you are better off than you actually are. You may be tempted to buy something else on credit, and before you know it you could have an even worse problem: too many bills with too little income.

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