How to Get a Debt Consolidation Loan for a Bad Credit Score?

How to Get a Debt Consolidation Loan for a Bad Credit Score?


10 Min Read

For many people, debts are like black clouds that cover their lives. When they’re stuck in debt, it can be hard to see the solution. Higher and higher payments pile up from one month to the next and people start to feel overwhelmed. If you’re one of them, you’ll be happy to find out that it’s not that hard to consolidate debt. A new personal loan is the key to covering your credit card balances and other debts.

Consider a debt consolidation loan (bad credit history) as an excellent way to pay off smaller loans with a larger one with better repayment terms and interest rates.

Below, we have prepared a plan to help you get your finances in order. It will not be easy and you will have to make some changes, but the peace of mind you will feel after paying off your debts will be worth these sacrifices. But first let’s start with a clear definition of debt consolidation loan.

What Is a Debt Consolidation Loan?

Imagine combining your multiple loans in one bigger loan that has a single interest rate and one repayment schedule. It helps you lower the amount you pay in an interest charge and origination fee because you take a larger loan, pay off all your smaller loans at once. After paying off all the debts, you continue repaying the bigger loan.

However, there are several risks that come up with debt consolidation loans. One of them is bad credit. If your FICO score is below 680, it’s challenging to qualify for one. But if you find a bad credit lender that provides such loans, consider finding a suitable solution to consolidate your debts.

Benefits of a Debt Consolidation Loan

To understand better how a debt consolidation loan for bad credit can save you from debt cycle, we’ve listed several benefits you’ll have once you start paying your outstanding loans:

  • When combining multiple loans into one, you save extra dollars on the interest rate and origination fee.
  • You make a single monthly payment instead of several installments.
  • You can get more money from the same loan amounts instead of paying multiple loans.
  • Most debt consolidation lenders have no minimum credit score requirements.
how to consolidate debt

How to Qualify for Bad Credit Consolidation Loans?

Bad credit consolidation loans are one of the most popular options for bad credit borrowers. But how do you know if you qualify? Unfortunately, it’s not as easy as just asking for them or filling out the loan application online. You must meet specific requirements to get the loan approval.

Here are some things to consider when you want to get debt consolidation loans:

  • Be 18 years old or older;
  • Be a U.S. citizen or permanent resident (green card holder);
  • Have a stable source of income (at least $1,000 per month);
  • Have an active bank account;
  • Have a valid phone number and email address.

4 Steps to Getting Consolidation Loans for Bad Credit Scores

Most debt consolidation loans for bad credit scores aren’t impossible to get. They can be easier to obtain than traditional joint loans because they have easier eligibility criteria. Here are four steps that you can take to get debt consolidation loans:

Check and monitor your credit score

If you want to have a fair credit score and get a consolidation loan, you’ll have to check it periodically and ensure they’re accurate. If there are mistakes on your report or if there are errors in how the credit bureaus calculate your score, you may be able to fix them.

Shop around

The second step to getting consolidation loans for bad credit scores is to shop around. You want to ensure you’re getting the best rate (and no origination fee) and terms from the lender you choose, so you must shop around before jumping into anything. More than that, try to find a lender that has no minimum credit score requirement.

Consider a secured loan

Rely on a secured personal loan that requires collateral such as a vehicle or real estate. But many Americans prefer to use a car as collateral instead of their home to get some extra cash. You can borrow considerable loan amounts against this collateral, and the lender holds onto it until you repay your secured loan. The collateral value sets the maximum loan amounts you can borrow. It is an excellent solution if you have problems with your credit.

Wait and improve your credit

Getting a personal loan with bad credit is a good option. But if you want better loans, consider improving your credit score by making other payments on time. Find the best way to cover your small debts with consequent repayment schedules. After several months, check your credit report (it’s free on governmental platforms) and see the results.

Tips for Comparing Bad Credit Debt Consolidation Loans

Are tired from long advice on how to get a reasonable debt consolidation loan? Here is our short list of tips you may follow while comparing bad credit loans for debt consolidation:

  1. Search for the best charges, terms, and minimum credit score requirements. Find at least top 10 lenders in your town and compare their offers in an Excel table. It will ease your task to find the best terms.
  2. Ask as many questions as you want. The more informed you are, the better decision you can make about which loan is right for you.
  3. Read the fine print. If something seems fishy or off-putting, don’t ignore it. Instead, ensure it doesn’t come back later as a surprise.

Get a Debt Consolidation Loan for a Bad Credit Score

How to Consolidate Debt?

Paying all your debt doesn’t look like you’ll save money. Maybe your budget is going to be crushed but it is worth doing it and breathing easily. So, consider these tips on how to consolidate your debt:

Recreate your budget

The first step is to calculate all your expenses. Begin with rent or mortgage, groceries, utilities, gas, and other bills you pay for living. Also, don’t forget about so-called second expenses like clothing and entertainment. Then make sure you know exactly how much money is coming in every month and what it’s going toward.

Pay off all debt immediately

It is the best way to consolidate your debt and avoid increasing it in the future. Use a cash-out refinance or home equity loan to pay off multiple debts if you can. If that isn’t possible, see if you can get a lower interest rate on each debt by calling your creditors.

Resolve any spending issues

It’s a common problem: you’ve got a few hundred dollars in credit card debt, and your monthly bills are so high that you can’t even begin to think about paying off the credit cards. So you might be tempted just to ignore it. But it is a bad idea! If you don’t pay attention now, your debt will grow and grow until it’s unmanageable.

Alternatives for Credit Card Consolidation with Bad Credit

If you’re looking for an alternative to credit card consolidation with bad credit, we’ve got good news: a few debt consolidation loan options are available.

Cover your debts by yourself

People with debts and bad credit always choose credit card consolidation and try doing it by themselves. Maybe you should do it too, but if you’re trying to get a loan for covering more significant expenses, you may want to look into other options instead.

Assess your budget. Before you consider taking on any more debt, ensure you don’t have unnecessary expenses that prevent you from repaying your debts on time.

Renegotiate the repayment terms of your debt. If you want to start paying off debt on time, try to renegotiate the terms of your repayment plan with lenders. You’ll lower interest rates (and origination fees) and eliminate additional fees. They could get you out of debt faster than expected.

Ask for a due-date adjustment. For example, if you’ve already refinanced or consolidated with another company, try asking them to change your due date so that you can cover your debt on time.

Debt management plan (DMP)

You can try requesting a DMP from your creditors. If they agree, they’ll work with you to create a plan to help you pay off your debt faster by adjusting your interest rate and allowing you to make one monthly payment instead of several. As a result, you’ll be able to lower your expenses significantly and pay off your existing debts sooner than expected.

Home equity

It is a loan that uses your home as collateral, so you’re only borrowing against the value of your house, not any additional money. So it’s best if you have 20% equity in your home and if you don’t have any other debts, like payday loans or personal loans on your house. A home equity cash loan is typically a fixed-rate loan for ten years or so but has high-interest rates.

consolidation loans for bad credit

What to Do If You Still Don’t Qualify for a Debt Consolidation Loan?

If you don’t qualify for a debt consolidation loan, there are still ways to get your finances under control. Try some of these tips:

Try credit counseling

If you can’t manage your credit problems, choose a nonprofit credit counseling agency. It will help you understand how to pay off your debt and ensure you never get in such a cycle again. It is hard to find a professional credit counselor that could create suitable debt management plans. However, start testing your options and see what fits your needs.

Get a debt settlement

A debt settlement company is a financial institution that renegotiates, settles, or in some way changes the terms of a person’s debt to a creditor or debt collector. The latter often has lower fees and can help you save money by lowering your monthly payments. However, dealing with debt settlement companies can be risky. You should verify the company’s legal assets and licenses before choosing it for your help.

Declare Bankruptcy

You might even consider declaring bankruptcy if your credit score is too low to qualify for a loan. If that’s the case, we recommend you start building your credit score back up through responsible spending habits and paying off any high-interest debt before trying again for a consolidation loan.

Watch out for predatory lenders

Predatory lenders (like loan providers who don’t operate under state lending laws) are companies that charge high-interest rates and fees in exchange for providing personal loans. Such debt consolidation lenders often provide short repayment schedules that aren’t manageable. If the borrower doesn’t cover the loan on time, they risk damaging their credit score because of late fees and additional interest charges that aren’t applied legally.

Bottom Line

Getting a debt consolidation loan is an excellent way to get out of debt. It’s also a good option to improve credit scores.

But getting the best debt consolidation loan isn’t as easy as it sounds. Maybe you shouldn’t rely on banks or credit unions for your debt consolidation. It’s because of their hard pull on your credit report. That’s where we come in!

Our lenders provide the most okay debt consolidation loans with bad credit reports, so you can get a fair deal possible on personal loans and all of these with no prepayment penalty. They only perform a soft credit check and have no minimum credit history requirements. Together, we make the process simple and fast so you can start seeing results immediately.

Frequently Asked Questions

What does your credit score need to be for a debt consolidation loan?

If you want to get a debt consolidation loan, your credit score must be at least 620. This is the minimum credit score requirement.

Does debt consolidation affect my credit report?

Consolidating your debt can lower your monthly payments, but it can also cause a temporary dip in your credit score. However, as long as you manage your debt responsibly, any negative effects will be temporary.

How do I get out of debt with no money and bad credit?

You need to work on your credit score. Then, you can borrow money and pay it back as quickly as possible. You can also create a debt payoff strategy by covering small debts, like utilities and cell phone bills, to start building a good record of taking on debt and paying it off promptly.

Start Your Journey to Financial Freedom with a Debt Consolidation LoanApply

Kerry Vetter

Written by Kerry Vetter

Written by Kerry Vetter

Kerry is a finance expert thanks to her Boston College education during the 1990s. Today she shares this valuable knowledge through the pen and online from her home in Chestnut Hill, Massachusetts. The years of experience results in relevant, practical and wise advice.

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