Getting a debt consolidation loan with bad credit: How to do it
Getting a debt consolidation loan with bad credit: How to do it

Getting a debt consolidation loan with bad credit: How to do it

Getting a debt consolidation loanword with bad credit : How to do it If you ’ re struggling to pay off debt and you have regretful recognition, you might be able to get approved for a debt consolidation lend — but be careful. “ Bad credit ” loans typically come with drawbacks, including high gear interest rates. editorial bill : Credit Karma receives compensation from third-party advertisers, but that doesn ’ thymine affect our editors ’ opinions. Our third-party advertisers don ’ t review, approve or endorse our column content. It ’ second accurate to the best of our cognition when posted .Advertiser Disclosure

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It’s tough to deal with debt, especially when you’re struggling with credit, too. Mounting debt may affect your credit scores negatively, and bad credit can make it difficult to qualify for lower-interest loans that could help you pay down debt sooner.

A debt consolidation loanword may seem like the perfect solution to getting your monthly payments under control. But finding a debt consolidation lend with bad credit can be unmanageable. In fact, even if you ’ re approved for a debt consolidation lend with bad credit, you might not receive a better interest rate on the debt you ’ rhenium consolidate. And you may wind up paying more in fees and interest .
It ’ s possible to get a debt consolidation loanword with bad accredit. But it ’ randomness authoritative to be aware of the drawbacks, including high interest rates and other costs, that are typically associated with bad-credit loans .
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What is a debt consolidation loan?

A debt consolidation loan is a new loanword that you apply for to pay off current debts, like credit card balances. The balances from your existing debt are transferred to the new loan, and you make payments on your newfangled debt-consolidation loanword .
When you ’ rhenium looking for a debt consolidation loanword, it is important to look for more friendly terms, such as a lower interest pace, compared to the terms associated with your stream debt. The goal is to find loanword terms and an interest pace that are more manageable for you .
here are a few ways a debt consolidation loanword could help you .

Go from multiple monthly payments to just one

Making respective types of debt payments each month, whether you ’ re paying on multiple recognition tease balances or personal loans, can be unmanageable to manage .
rather than risk losing track of all those monthly payments, a debt consolidation loan could let you make fair one monthly requital alternatively of many, which may be easier for you to remember .

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Possibly get a lower interest rate

A debt consolidation loan may have a lower concern pace than you ’ re presently paying on other debts. The average credit card interest rate in the third base quarter of 2020 was about 14.6 %, according to Federal Reserve data. But the average interest rate for a 24-month personal loanword, which can be used to pay off other debts, was good 9.34 % .

Help your credit

If consolidating your debt allows you to pay citation calling card debt down more promptly, you may be able to improve your credit use pace — which may help boost your credit scores .
Another crucial factor in credit score is payment history — and with a debt consolidation lend, you could potentially improve your record. Rather than keeping track of multiple payments, a debt consolidation loan leaves you with equitable one requital to stay on top of every calendar month .

What credit scores do I need to get a debt consolidation loan?

different credit-scoring models have different ranges of what scores are by and large considered poor, but scores 579 and below are typically considered poor in the FICO® Score 8 and FICO® Score 9 models. With scores in this range, it can be difficult to get a debt consolidation lend at all — let alone get one with favorable terms.

Using the like marking models, scores between 580 and 739 are broadly considered to be in the bonny to adept range. You ’ ll probably have a better luck of securing a debt consolidation loan with thoroughly terms in this range. Scores of 800 and above are broadly considered “ excellent ” and put you in a better position when applying for a debt consolidation lend than if your scores were lower .
It ’ s important to keep in beware though, that your credit scores are just one of the factors that a lender considers when deciding on whether to approve you for a debt-consolidation loanword .

Challenges of getting a debt consolidation loan with bad credit

You may face some significant obstacles when you ’ re looking for a debt consolidation loan with bad credit .
The first challenge is plainly getting approved. If your recognition scores are below a certain threshold, some lenders may not work with you. But because lenders typically consider a variety of factors ( and not just your scores ), including your credit rating history and debt-to-income proportion, you ’ re not necessarily ruled out if you have bad credit .
Take note : If you are approved for a debt-consolidation lend and you ’ ve struggled with credit, you may face higher interest rates than you would if you had strong credit .
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Looking for a debt consolidation loan with bad credit

If you ’ re looking for a debt consolidation loan when you have bad credit, do your research to find a loan that works for you. Approaching the work with a plan can help .

1. Check your credit scores

first, take a close look at your credit scores. Knowing your scores could give you a better estimate of which loans you can ’ thymine qualify for and which ones you might. besides, reviewing your credit reports could help you identify any errors that might be hurting your scores. You may even see opportunities to improve your credit .

2. Comparison shop

once you have a good understand of where your credit stands, start comparing terms offered by a variety show of lenders. Getting quotes from multiple lenders can help you understand what options may be available .
Getting prequalified can besides help you understand how likely you are to be approved for a certain lend. Prequalification can give you insight into the lender ’ randomness requirements and typically besides would be a cushy inquiry. That said, when you make the application, this would however be a hard inquiry .

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If your recognition international relations and security network ’ thymine great, you ’ ll need to search everywhere for the best loanword terms. Before you rule out any lenders, be sure to check them out. Credit unions and on-line lenders may be good options .
Credit unions may be more flexible with loan requirements. Because credit unions focus on their members, it ’ s possible that they ’ ll home less weight on your credit scores than a traditional lender might. And you might be able to find some on-line lenders that are able to work with borrowers who have struggled with credit .

4. Consider a co-signer with good credit

A co-signer is person who will share duty for a personal lend. Consider asking a friend or family extremity with dear credit and who ’ s willing to help you to co-sign your loanword .
Having a co-signer may mean that you could qualify for a loanword that you differently could not on your own. And even if you can qualify for a loanword on your own, having a co-signer with thoroughly accredit may help you qualify for a lower matter to pace .

Alternatives to a debt consolidation loan

It ’ sulfur important to know that debt consolidation international relations and security network ’ t the only way to deal with debts you ’ ra struggling to repay. here are some options that may help you pay down your current debt — without creating raw debt .

  • Reach out to your current creditors. They may be willing to negotiate repayment terms that are more manageable for you, rather than see you default on your debt.
  • Consider credit counseling. A credit counselor could help you craft a debt-management plan to help you get out of debt faster — and credit counseling is usually free.
  • Consider a 0% intro APR balance transfer credit card. If you’re working to pay off credit card debt, consider balance transfer options with an introductory 0% APR credit card.
  • Look into a home equity loan. If you have equity in your home, you may be able to get a home equity loan or line of credit to pay off high-interest debt. Because the loan’s secured by your home, you may qualify for a lower interest rate. But be careful: If you default on your home-equity loan, the lender could take your home.

Bottom line

If you ’ ra struggling to keep path of multiple debt payments each calendar month or have high-interest debt that you ’ d like to refinance at a lower rate, a debt-consolidation lend might be an option for you — evening if you have what creditors consider “ bad credit. ” But your citation may make it difficult to get favorable rates and terms on a debt-consolidation loanword.

Before you commit to any lend, make sure to explore all of your options. once you find a lend that works for you, be certain to always pay the agree sum on time every month. This can help you begin to improve your accredit over meter .
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About the author: Sarah Sharkey is a personal finance writer who enjoys helping people make better financial decisions. She especially loves to help young people learn how to set up their finances for a better future through her blog, … Sarah Sharkey is a personal finance writer who enjoys helping people make better fiscal decisions. She specially loves to help unseasoned people learn how to set up their finances for a better future through her blog, … Read more.

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