How to Get a Debt Consolidation Loan for a Bad Credit Score?
10 Min Read
Reviewed by Michael Lefler If you’re looking to consolidate debt and get a new personal loan to pay off your credit card balances and other debts, you may wonder if it’s possible to do so if you have a low credit score. The good news is that, yes, it is possible! But first, you must find a lender to handle your difficult financial situation.
A debt consolidation loan (bad credit history) offers an effective way to pay off multiple smaller loans with a larger one and get better interest rates and repayment terms. It can help you save money over time because you’re making fewer monthly payments on time. Plus, there’s only one due date.
Table of Content
What Is a Debt Consolidation Loan?
Benefits of a Debt Consolidation Loan
How to Qualify for Bad Credit Consolidation Loans?
4 Steps to Getting Consolidation Loans for Bad Credit Scores
Tips for Comparing Bad Credit Debt Consolidation Loans
How to Consolidate Debt?
Alternatives for Credit Card Consolidation with Bad Credit
What to Do If You Still Don’t Qualify for a Debt Consolidation Loan?
Bottom Line
Frequently Asked Questions
What Is a Debt Consolidation Loan?
A debt consolidation loan is a type of personal loan that allows you to combine all your other loan funds into one larger loan. The idea is that this will help lower the amount you pay in an interest rate and origination fee because you take a larger loan, pay off all your smaller loans at once, then continue paying off this one larger loan.
But there are some risks in taking on a debt consolidation loan. For example, getting approved for a consolidation loan with bad credit can be challenging. And if you do get approved, it could cost more than expected.
Benefits of a Debt Consolidation Loan
If you’re having trouble paying off your debts, a debt consolidation loan with bad credit might be the answer. This type of loan combines all your debts, allowing you to pay off those debts in one monthly payment. The benefits of a debt consolidation loan with bad credit include the following:
- You can save extra dollars on the interest rate and origination fee by combining multiple loans into one.
- You can repay multiple loans with one direct payment instead of over time.
- 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 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:
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.
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. Plus, you can look for a lender that has no minimum credit score requirement.
A secured personal loan requires collateral, such as the title to your vehicle or real estate title. But many consumers prefer to use a car as collateral instead of property to get some extra cash. The lender will let you borrow loan amounts against this collateral, and they’ll hold onto it until you repay these secured loans. The minimum loan amounts vary by the collateral’s value. It can be a good option if you’ve had trouble with credit.
It can take anywhere from a few months to a year. You don’t want to rush into it and get a personal loan with bad credit you can’t repay. So wait some time, and try to improve your credit score till you make it fair to apply for better loans. Don’t overburden yourself with lots of expensive short-term loans. They might make things harder to improve. Also, a second payday loan is usually harder to obtain due to law and lenders’ restrictions. Read our article to learn how many loans you can have at a time.
Tips for Comparing Bad Credit Debt Consolidation Loans
If you want to get a debt consolidation loan, it’s essential to know what to look for. Here are some tips:
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Look for the best rates, terms, and minimum credit score requirements.
Don’t just go with the first option you find. Make sure you compare rates and terms to ensure you’re getting the best deal possible.
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Don’t be afraid to ask questions.
The more informed you are, the better decision you can make about which loan is right for you.
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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.
How to Consolidate Debt?
It can be a complicated process if you’re looking for ways to save money. You might be surprised at how much you can save in certain life situations. Here are some tips on how to consolidate your debt:
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Create a budget.
The first thing you need to do is create a budget that works for you. It should include your expenses, like rent/mortgage, utilities, groceries, gas, and other bills. Plus, have anything important to your lifestyle (like entertainment or clothing). Then make sure you know exactly how much money is coming in every month and what it’s going toward.
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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.
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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.
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Do It Yourself
Credit card consolidation is a popular option for people with debt and bad credit. But if you’re trying to get a loan, you may want to look into other options instead.
Overhaul 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’re already paying off debt, consider renegotiating the terms of your repayment plan with creditors. It can help lower interest rates (and origination fees) and eliminate fees, which could get you out of debt faster than anticipated.
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.
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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.
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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.
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:
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Choose credit counseling
A nonprofit credit counseling agency can help you figure out how to pay off your debt and ensure you never get into this kind of situation again. Look for a professional credit counselor that knows everything about debt management plans and how to repay existing debt.
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Get a debt settlement
One option is to negotiate with your creditors yourself. You can do this over the phone or in person, but be prepared to have tough conversations with them. Another option is to use a debt settlement company. The latter often has lower fees and can help you save money by lowering your monthly payments.
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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.
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Watch out for predatory lenders
Predatory lenders (like multiple lenders or credit unions) are companies that charge high-interest rates and fees in exchange for providing personal loans. The problem with these debt consolidation lenders is that they often require borrowers to pay back their loan proceeds within six months or less. If the borrower does not meet this deadline, then they risk having their credit score negatively impacted even further by late fees and additional interest charges.
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. Banks and credit unions may not help you consolidate your debts and increase your credit score if you have a bad 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.
Start Your Journey to Financial Freedom with a Debt Consolidation LoanApply
Frequently Asked Questions
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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.
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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.
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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.
