Posted by The TaxAdvocate Group, LLC

How to Get a Debt Consolidation Loan With Bad Credit

How to Get a Debt Consolidation Loan With Bad Credit

For you to get a debt consolidation with bad credit, you have to shop around. There are, however, options like online lenders and loans from credit unions. Some lenders will take care of you even with bad credit. They do not use your credit score; rather, they consider other factors like income, job history, and education.

The interest rate on a debt consolidation loan is usually lower, which is designed so you can quickly pay off your debt. 

Getting a debt consolidation loan with a low credit score 

Check your Credit Report: at times, the reasons you might have a poor score is due to mistake on your credit report. There could be errors like wrong accounts, false credit limits, wrongly reported payments. A little rise in your credit score might put the odds in your favor.

Add a co-signer: some lenders don't mind co-signers. This could work in your favor and lead to qualification at a lower rate. The co-signer’s credit score must, however, meet the lender's minimum requirement. You, alongside the co-signer, are responsible for the loan, and both your credit score could take a hit. 

Boost your debt-to-income ratio: If consolidating debt is not your priority, consider ways to make more money and get your debts off the way. Your debt to income ratio increases, putting the odds in your favor when you want to borrow

Shop around: there is a loan with repayment terms that might work in your favor. You can get this by comparing what multiple lenders have to offer. You can even check out online lenders. This will require a soft credit check that will not affect your credit check. 

Where to get a debt consolidation loan for bad credit

Credit unions: 

These are a financial organization that comes with a low-interest rate and pretty comfortable terms since they are not profit-oriented. This makes them preferable, compared to online lenders. 

The annual percentage rate for Federal credit is pegged at 18% for personal loans. This is more comfortable to lenders compared to what online lenders charge.

To apply with credit unions, you do not have to pre-qualify for a loan. In applying, there will be a hard credit check, which could leave some dents on your score in addition to making shopping around hard. 

Online lenders

If you need quick cash, online lenders might be your option. They provide fast cash because the whole application and funding process can be completed in a couple of days. They are, however, notorious for their unfriendly rate, as compared to credit unions. 

Their rate ranges from 16% to 36% based on a recent survey. You might also have to pay some fees, which will go into processing your loan. The cost will be removed from the entire loan; hence you need to make provision for this when borrowing. 

How to Manage your debt consolidation loan

Here are practical steps in managing your debt 

    •    Do Away With credit Cards: Even if you have paid off some debts on your credit card, it does not make sense to pack on new mortgages. Also, do not close the credit cards if you do not want your credit score to take a hit. 

    •    Make and Work with a Budget: debt repayment should be seen as part of your finances. This is because it involves the movement of money to take care of your needs, savings, and debt. With a budget, you can keep tabs on your progress, reduce spending, and have a plan to control your finances. 

    •    Connect With the Lender: if you cannot make a payment on time, keep your lender abreast as soon as you can to see if they can work something out. There are lender options like hardship programs or a temporary suspension of your payment till you get on your feet again. 

Debt consolidation loan alternatives

There are times debt consolidation might not be the best idea for you. Another option you can consider is:

Balance transfer credit card

A balance transfer is a process of moving a credit card debt with high interest to a new low-interest card. There are some cards with a lower rate and some 0% intro APR that spans a year or more. 

You, however, need excellent credit to qualify for this. There is an upfront payment of 3 to 5% of the funds you want to move. 

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