Getting A Debt Consolidation Loan With Bad Credit

November 24, 2020

Getting any kind of loan with bad credit is going to be a pain in the rear. This is because lenders generally do not want to extend credit to someone who has a history of not paying or a minimal credit record. With that said, getting a debt consolidation loan with bad credit can be tough, but it is not impossible. 

Try To Improve Your Credit Before Applying

While there are some companies that offer consolidated loans specifically for people with bad credit, they are not going to come with favorable terms. You should always strive to improve your credit score when you can — and especially when you are thinking about taking out loan. 

Here is how you might be able to do so before looking at debt consolidation:

  • Pay off some of your smaller bills. Knocking out some of your smaller accounts can be a big step toward improving your credit. Just make sure you are at least making the minimum payment on all your other bills while doing this. Hopefully, you will then be able to get a better net interest rate when you do eventually get a consolidation loan. Focusing on eliminating small accounts makes most sense in this scenario. 
  • Keep making your payments until you have consolidated. Your payment history is the single-most important factor in determining your credit score. Staying consistent with this can possibly boost you into a higher credit bracket — making you eligible for more competitive debt consolidation loans.
  • Boost your income if possible. There are two reasons for doing this. First, it will improve your debt-to-income ratio, which is a factor some organizations look at when determining creditworthiness. Having more money will also make it easier to pay down your debts, which will make consolidating easier while possibly improving your credit.  

Look At All Options Available To You

This applies for all things in life, but particularly when you are looking for an online debt consolidation loan for bad credit. It is important to compare offers from different organizations, as well as look into different types of debt relief that might better suit your situation. 

A credit counselor should be the first person you call when trying to determine what kind of debt relief will work best for you. These are financial experts who offer all kinds of helpful resources to consumers; from budgeting tips to creating debt management plans. 

If you are in a really tough spot with your debt, you might need to bring out some bigger guns. People who do not think consolidating will be enough can think about debt settlement. This is where you work with a debt relief agency to get your lenders to agree to a one-time payment in full for less than you owe. 

Consider A Co-Signer 

You will have an easier time getting a consolidation loan if you have a co-signer. This is typically a relative, or someone close to you who agrees to step in and pay if you cannot. Lenders are more likely to give you a loan in this scenario, because they have a backup if you do not make payments. However, this can be very damaging to the finances of the co-signer, as their credit will tank if the loan is not repaid. 

Debt consolidation can be an effective way to fix your finances. But it can be much more difficult when you are working with bad credit. Think about these ways you can make consolidation work even if you don’t have a great credit score. 

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Andi Perullo de Ledesma

I am Andi Perullo de Ledesma, a Chinese Medicine Doctor and Travel Photojournalist in Charlotte, NC. I am also wife to Lucas and mother to Joaquín. Follow us as we explore life and the world one beautiful adventure at a time.

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