Having a bad credit score does not always mean that you cannot qualify for a debt consolidation loan. If you fall under the category of bad credit and face hardship in making multiple monthly repayments, you can still get a debt consolidation loan from a number of lenders. Today, there are many banks and credit unions that offer consolidation loans to borrowers with bad credit rating.
Debt Consolidation is simply merging all your multiple high-interest debts and individual loans into a single loan having only one month repayment.
In this way, you avoid paying interest on your individual loans and pay only the interest on your consolidation loan. Moreover, this will allow you to make timely repayments and re-establish your credit.
By getting a lower rate loan, you will also be able to save some money that you can use somewhere else.
When are you considered Bad Credit?
When your credit score is below 620, you are probably considered having a bad credit. Generally, a credit score below 580 is considered as “very bad credit” and a borrower with such a score may find it hard to get a loan from a lender.
Thus, a credit score between 580-619 is usually classified as “bad credit”; however, there are numerous financial institutions that are willing to offer loans to such borrowers.
Pros and Cons of Bad Credit Debt Consolidation Loans
Whatever be your credit score, you still need to try your best to consolidate your debts as it’s only going to get worse over time.
The best thing about a bad credit debt consolidation loan is that you are still able to borrow fund despite having a bad credit score. This loan is tailored to help you get rid of your debts without much financial trouble.
A consolidation loan provides an opportunity to repair your credit status by making your payments on time.
However, you need to know that bad credit loans come with some disadvantages.
The major drawback of such a loan is that the interest rates are generally very high compared to other standard loans.
Being a bad credit borrower proves that you previously had some problems managing your finances, and this represent a higher risk to the lenders.
As a result, the interest rates they offer you will be usually higher than for someone having a good credit score.
Where to get debt consolidation loans despite Bad Credit?
Regardless of your present financial condition and credit rating, you may still find a number of credit unions and debt relief companies who will be more than happy to offer you several debt relief options.
You may also seek a home equity loan or line if you own a home or pursue a secured or unsecured personal loan option at your bank.
You just need to keep looking and contact debt relief companies and lenders before signing any kind of paperwork.
You can start your research by contacting your bank or credit union first to find out whether they offer debt consolidation loans for people with bad credit. If they don’t, then you can look out for other lenders and debt relief companies that are popular in the market.
You can also start cutting down on your expenses as you start looking to consolidate your debts. Debt relief companies want to see that you are willing to manage your finances better and they are not at a risk of facing default on your payments.