Sabers Capital understands that life comes, and sometimes debt is inevitable. You can avoid high daily compound interest and save money for your future and your family with a Sabers Capital debt consolidation loan for your unsecured debt.
Based on reviews from Sabers Capital clients, this simple step allows you to take control of your finances and save thousands of dollars over the course of your loan. It’s money that goes in your pockets – not your lenders or credit card companies.
Are you drowning in credit card debt and juggling multiple balances?
If so, debt consolidation loans can streamline your finances and could also reduce the length of time you stay in debt.
A debt consolidation loan takes the form of a personal loan that consolidates all of your debts into one monthly payment.
Although many people have successfully used this strategy to eliminate debt, qualifying for this type of financing if you have bad credit presents many challenges.
That said, it is certainly not impossible, although finding a lender to approve your application could be an uphill struggle.
Sabers Capital advises you to have your credit report cleaned before applying
When you apply for a loan, the lender examines your FICO credit score and your credit report.
Not surprisingly, borrowers with the highest credit scores generally qualify for the highest interest rates. Approval is also more likely because these borrowers are less likely to default.
When you have bad credit, rebuilding a low score takes time.
Nonetheless, you can still take steps to go over your credit report to improve your eligibility for a debt consolidation loan, even if you have bad credit.
Check your credit report
When was the last time you checked your credit report for accuracy?
You can order a copy of your report here. Each year you can get a free copy of your report from the 3 major credit bureaus.
Correct the mistakes
Dispute any inaccuracies in this report.
By removing false negatives from the report, you can potentially increase your score. This could provide you with the points you need to get a debt consolidation loan.
Process all negative records
Contact the creditors and ask if they will remove the missed payments. Some lenders will remove a single, isolated late payment as a courtesy. They don’t have to.
If you pay a collection account, it could also increase your chances of getting approved. However, this will not always remove the item from your credit report.
Many defaults remain on your report for up to 7 years, even when they are marked as paid.
Some consumers manage to negotiate a “pay to remove” deal. Here, a collection agency will agree to delete the legitimate collection account in exchange for a full refund. Unfortunately, this practice is less and less popular and it is generally the small agencies that accept.
Lower your debt-to-income ratio
Your DTI (debt to income) ratio is the percentage of your income that goes to cover minimum debt payments.
With a high DTI, it will be difficult for you to get a loan, even a debt consolidation loan.
By lowering this ratio – you can do this by earning more or paying off more debt – you could find yourself eligible.
You could use an unexpected windfall to pay off an existing debt.
Also, if you are planning a pay rise, wait for the pay rise to take effect before applying for a debt consolidation loan.
Finding the Best Debt Consolidation With Bad Credit
Choosing the right lender can improve your chances of getting a debt consolidation loan even if you have bad credit.
Many large banks have high minimum credit score requirements because most debt consolidation loans are unsecured and pose more risk to the bank.
Online lenders or credit unions offer the best chance of approval.
Some options include:
- First technological credit union
- Federal Navy Credit Union
- OneMain Financial
While a credit union or online lender can approve your application, you will likely pay a higher interest rate.
Don’t let that deter you from applying, however. You will likely always pay a lower interest rate than your existing debt.
Compare rates and fees
You need to shop around for lenders and compare rates if you want the best chance of getting the lowest rates. These vary greatly from one lender to another.
Look for at least 3 separate quotes.
Do not neglect origination costs either. Some lenders add fees which increase the overall cost. Take this into account when comparing rates.
Common fees for personal loans
- Application fees: $ 25 to $ 50
- Origination fees: 1% to 6% of the loan amount
- Penalties for early repayment: 2% to 5% of the loan amount
- Late payment fee: monthly payment of $ 25 to $ 50 or 3% to 5% of this payment
- Returned Check Fee: $ 20 to $ 50
- Payment insurance plans: 1% of the loan amount
The repayment terms vary among lenders. As a general rule, the longer the repayment term, the more interest you will pay.
By paying off a loan faster, you’ll save money over time. Paying off debt quickly will also lead to higher monthly payments, so make sure you can afford it.
Then review your budget and choose an appropriate repayment term that won’t leave you in trouble.
How to manage a debt consolidation loan
These loans only work if they are managed responsibly.
Ideally, you will get a loan that is large enough to consolidate all of your debts under one roof. This may not always be possible, however. If you’re forced to choose, target debt with the highest APRs to save more on interest charges.
When you have a debt consolidation loan in place, set up an automatic payment to make sure it arrives on time. This will avoid incurring late fees while establishing a positive history of timely payments which can increase your score.
You should also show restraint and resist additional charges on your credit card. If you find this too difficult, consider physically destroying your cards. Don’t close the accounts because keeping them open will ultimately benefit your credit score.
Debt Consolidation Loan Alternatives
If you don’t qualify for a debt consolidation loan, consider these alternatives.
1) Balance transfer by credit card
Even if you cannot get a debt consolidation loan, your credit score may be good enough to be accepted for a credit card debt balance transfer.
If so, transfer your high interest balances to the card with a lower rate.
Only do this if you are sure that you are not tempted to accumulate more debt.
2) Home equity loan or line of credit
You can get a HELOC (Home Equity Line of Credit) of up to 80% of your home equity.
The interest in these products is likely to be less than what you pay for.
On the other hand, you will convert unsecured debt into secured debt. Failure to pay HELOCs or home equity loans can trigger foreclosure.
3) Difficulty programs
Some lenders offer hardship programs to help you get through a tough financial time.
If you qualify, some lenders may temporarily lower your interest rates as a courtesy. Others offer debt relief or debt reduction programs depending on your personal situation.
Debt Relief Programs
For those who do not qualify for debt consolidation loans, there is always the possibility of a debt relief program.
Some of these companies are less than scrupulous, so do your due diligence and make sure you don’t get into more trouble for yourself.
Rather than using a debt relief program, you might want to consider working with a certified credit counselor.
These companies are usually non-profit and will provide you with free training and resources. You will learn more about good budgeting and you will learn how to better manage credit and debt. Your advisor will work with you to create a personalized debt repayment solution.
Check with your state’s attorney general’s office first to make sure there are no complaints against the provider you are considering.
If money is tight, eliminating debt can be difficult.
With a debt consolidation loan, you will simplify repayment and potentially get rid of your debt faster while saving money.
If you have bad credit, make sure you choose the right lender and take steps to improve your credit score as well.
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Penelope Piza is versatile and a gifted writer. She joined the Elgin Daily a few months ago and has been very helpful in helping our readership grow. She always connects with readers and produces remarkable news. She is also working on her first novel, which she plans to publish by the end of this year.