How To Get A Debt Consolidation Loan With Bad Credit

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There are ways to consolidate your debt, regardless of your credit rating. (iStock)

Debt Consolidation Loans are a way that consumers with multiple debts can start paying off their balances. With these loans, all debts are consolidated into one account, which allows borrowers to make a single monthly payment until the balance is paid off.

This simplifies the budgeting and repayment process and, in many cases, can even completely reduce the cost of borrowing money.

But debt consolidation loans often require high credit scores. For consumers who don’t fall into this category, read on.

How To Get A Debt Consolidation Loan With Bad Credit

According to Howard Dvorkin, CPA and president of Debt.com, consumers will generally need a FICO score of at least 700 to qualify for an affordable debt consolidation loan. Borrowers with scores below this threshold, however, are not without options.

“For those looking to get a consolidation loan with bad credit, a loan co-signer can help them consolidate without a problem,” Dvorkin said. “However, consumers with bad credit should be very careful when looking for a loan, as predatory lenders typically lend to borrowers with bad credit.”

Finding lenders is essential for all borrowers, but especially those with poor credit scores. Use an online marketplace like Credible to make sure you’re getting the best rate and the best lender for your needs.

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How to increase your credit score

Fortunately, credit scores are constantly changing, so consumers with low credit scores can improve theirs before applying for a loan.

There are several ways to do this, including:

  1. Reduce your debt and credit card balances
  2. Pay your bills on time, every time
  3. Correct mistakes on your credit report
  4. Request a credit line increase
  5. Be added as an authorized user to the account of a highly credited person
  6. Avoid new loans and credit cards
  7. Keep long-standing accounts open (even when paid)

With a debt consolidation loan, you could potentially save on interest, which would both reduce the total amount you end up paying over time and help you pay off your debt faster. To get an idea of ​​the personalized loan options available to you, visit Credible to compare rates and lenders.

Amid the COVID-19 pandemic, the three major credit bureaus are offering free weekly credit reports to all Americans (until April 2021). Consumers looking to improve their scores should use these reports to track their progress.

Other options

Debt consolidation loans are not the only option for consumers struggling with a lot of debt. Balance transfer cards can also be a strategy to consider.

Balance transfer cards allow borrowers to transfer their debts onto a single credit card, often one with a promotional period of low or no interest. If the borrower can pay them back within this time frame, it can mean significant savings in the long run.

If you’re looking to get rid of debt fast, a credit card with balance transfer might be just what you need. Consider using an online marketplace like Credible to compare some of the best balance transfer cards side by side and choose the one that’s right for you.

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Types of debt to consolidate with a personal loan

Many consumers use personal debt consolidation loans to settle high credit card balances, but according to Dvorkin, these are not the only options for debt consolidation.

“Most people think that debt consolidation loans can only take over credit card debt, but consumers can consolidate debt from unpaid medical bills, collection accounts, and payday loans,” Dvorkin said. “There is also consolidation for certain types of loans such as federal student loans, private student loans, and auto loans.”

If you want to get a feel for the debt consolidation loan options available to you, visit Credible to compare rates and lenders.

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Pros and Cons of Debt Consolidation with a Personal Loan

Consolidating debt can have important benefits.

Advantages

  • It simplifies reimbursement: This means that only one payment is due per month, which makes budgeting and money management easier.
  • Lower payments and lower interest rates: For those with good credit scores, this could be another plus. “If someone is struggling to pay minimum credit card statements and has up to $ 25,000 in credit card debt and a decent credit score, a consolidation loan can lower their monthly payments,” reduce its interest rate and help it get out of debt faster. Dvorkin said. “Debt consolidation is better than debt settlement, and it can help maintain a good credit rating if done right. “

To take advantage of these benefits, go to Credible to apply for a debt consolidation loan today.

The inconvenients

On the other hand, debt consolidation loans can also be risky, especially for those with bad credit habits.

  • Potentially worsen your financial difficulties: Not repaying the loan or, worse yet, using the loans for other purchases (not just to pay off those debts) can cause you more financial problems.

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The bottom line

Dizzying debts are not insurmountable. With debt consolidation loans and balance transfer cards, there are solutions, even with bad credit.

For consumers opting for a consolidation loan, shopping around (Credible can help) is essential, as is using a detailed loan calculator to ensure these payments will be affordable. It’s also a good idea to talk to an experienced loan officer or financial advisor.

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