How to get a Loan to Consolidate Debt if You Have Bad Credit
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How to Receive a Debt Consolidation Loan With Poor Credit
Getting a debt consolidation loan that has poor credit might require building your credit or even co-signers.
The last update was on Jan. 24 2023.
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Getting a if you have bad credit could require some searching around However, there are alternatives that include loans through credit unions as well as online lenders.
Some lenders even cater specifically to borrowers with bad credit (a credit score below 630) and consider factors beyond score, including the amount of education, income and work experience.
This article will help you determine if the consolidating debt loan is a great idea to tackle your debts and how to obtain one.
How do you get a consolidation loan?
The credit consolidation loan is a personal loan you use to combine to pay down multiple loans at one time — think credit card balances, medical bills, or any other non-secured personal loans which means you only have one monthly installment.
Ideally, this installment comes with a lower interest rate than your current debts and can help you save money and allow you to pay off debt quicker.
Is a debt consolidation loan a good idea?
If you’re having trouble paying off debt and qualify for a low enough interest rate for an loan, debt consolidation is generally a good idea.
Here are a few benefits:
It saves money on interest. The most significant benefits of debt consolidating is money you save on interest by consolidating debt under a lower rate. Even a couple of percentage points can make a huge difference in the total amount of interest saved. Use our to see the savings you could make.
You can reduce debt more quickly. When you consolidate with a lower interest rate, you can pay off debt quicker by applying the savings to the balance remaining. You may also opt for an early repayment period on a debt consolidation loan so long as you can manage the monthly payments.
It streamlines the process. Instead of keeping the track of several debts, by taking out debt consolidation loan, you’ll have only one installment to pay. Consolidation loans also have fixed terms, so you’ll know when your loan is due that can help keep you on track.
It could help improve your credit. While taking out a consolidation loan may temporarily take a few points off your rating, but the long-term impact should be positive when you begin to clear your head of the debt.
How do you get an debt consolidation loan with poor credit
1. Verify your credit score
Are mistakes in your credit report the reason behind your low credit score? Check for errors such as wrong accounts, inaccurately reported payments or inaccurate credit limits.
You can access your credit report every week for free with each of the three major credit reporting bureaus — Experian, Equifax and TransUnion by making use of .
Even a small bump within your credit rating could be enough qualify you for a debt consolidation loan. A change from a poor credit score to a fair one (630 or 689) can also result in a more affordable loan with the possibility of a lower interest.
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Another tip is to pay off all small debts. This reduces the credit utilization rate which makes up 30% on your score. It can also boost the overall score , that lenders use to determine your ability to pay back an loan. The lower your DTI ratio is, the more likely the lender will consider approving you for a loan application.
2. Take into consideration a secured, co-signed or joint loan
Some are more straightforward to obtain, such as a secured, co-signed or joint loan.
When you take out a loan, you utilize collateral such as a car or savings accounts to help ensure the loan and the lender is more likely to accept you or extend the loan at a lower rate. However, if you fail to repay the loan you forfeit the collateral.
with a higher credit score or income can boost your chances of approval. However, note that co-signers take on equal responsibility for the loan regardless of the fact that they do not have access to the funds. If you don’t pay your loan on time or don’t pay back the loan your co-signer’s credit score could be affected.
are similar to co-signed loans However, the co-borrower is granted the same rights to the money.
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3. Shop around and pre-qualify
For the best price on the debt consolidation loan You’ll need to examine rates and terms with several lenders. The most efficient way to do this is via . You can get pre-qualified with many online lenders to see estimated rate and loan amounts. This requires a soft credit test, which won’t hurt your credit score.
Also look for consumer-friendly features like direct payment to creditors This means that the lender will transfer the loan funds to your creditor, simplifying the process -and removing any incentive to use the money to pay for other things.
Are you looking to consolidate your debt? See if you pre-qualify for an credit consolidation loan.
Answer a few simple questions to receive personalized results of our lendersand without impact on the credit rating.
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4. You can apply for the debt consolidation loan
After you’ve decided on the lender, you’ll be required to make an application to get the loan. This is usually done on the internet, and you’ll be asked to supply personal information such as details about your Social Security number, and documents that verify the identity of you, your income, and work.
The time to approve varies by lender. You’ll typically receive your funds within one week, although some online lenders provide next-day and same-day financing.
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5. Make sure to pay off your debt and pay for loan payments
After you have received the funds you have in the account make use of these funds for paying off outstanding debts. If the money is being given to your creditors in exchange for you, confirm every creditor you have with that the debt was successfully paid off.
Next, make a plan to follow, which could include creating an budget that prioritizes your monthly payments and keeping an eye on any refinancing possibilities.
The majority of lenders charge a late fee for missed payments — and then report them to credit bureaus. This can harm your credit score so you might want to set automated payments to avoid falling in debt.
How to obtain a credit consolidation loan for those with bad credit
Credit unions
They are non-profit financial institutions that can offer flexible terms and lower rates than online lenders.
Federal credit unions limit annual percentage rates for personal loans at 18%..
Certain credit unions do not allow you to pre-qualify for an loan; applying will require a credit check, which can temporarily lower your credit score and make it difficult to find a loan.
It is also necessary to be a members of the institution to apply for the loan and this could involve living or working nearby and paying a modest annual membership fee. A local credit union is a good place to start, though national credit unions also provide the debt-consolidation loans.
Online lender
are more convenient and often provide fasting funding, but they might charge higher fees for those with poor credit as credit unions do.
The online lender may also charge for the cost for processing your loan. The fee is typically taken out of the loan proceeds, so you might need to apply for a larger loan in order to obtain the complete amount you need.
is one of the best online lenders to get a bad credit loan. If you get a debt consolidation loan and Upgrade is able to transfer the funds straight to the creditors you may get an additional discount on rates of 1 to five percentage points.
Also, they accept applications from those who have bad credit. They also look at other information in your application, such as college major and work history that could increase the chances of being approved and getting a low rate.
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4.5 NerdWallet’s ratings are compiled by our editorial staff. The scoring formula takes into account factors we consider to be friendly to consumers, such as the impact on credit score, rates and fees as well as the customer’s experience and ethical lending practices.
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5.0 NerdWallet’s rating is determined by our editorial staff. The scoring algorithm takes into consideration aspects we consider to be a good choice for consumers, such as the impact on credit score, fees and rates customers’ experience, and ethical lending practices.
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4.5 NerdWallet’s ratings are compiled by our editorial team. The scoring formula considers factors we consider to be a good choice for consumers, such as impact to credit score, rates and fees as well as the customer’s experience and ethical lending practices.
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5.0 NerdWallet’s ratings are determined by our editorial staff. The scoring algorithm takes into consideration aspects we believe are friendly to consumers, such as the impact on credit score, rates and fees, customer experience and responsible lending practices.
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5.0 NerdWallet’s rating is determined by our editorial staff. The scoring formula takes into account the factors we believe to be consumer-friendly, including the impact on credit score rate and fees, the customer experience and ethical lending practices.
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4.5 NerdWallet’s ratings are compiled by our editorial staff. The scoring formula considers the factors we believe to be beneficial to consumers, including impact to credit score, fees and rates customers’ experience, and responsible lending practices.
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5.0 NerdWallet’s rating is determined by our editorial team. The scoring algorithm takes into consideration aspects we consider to be a good choice for consumers, such as the impact on credit score, fees and rates, customer experience and ethical lending practices.
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5.0 NerdWallet’s ratings are determined by our editorial team. The scoring algorithm takes into consideration factors we consider to be friendly to consumers, such as the impact on credit score, rates and fees customers’ experience, and ethical lending practices.
5.0 NerdWallet’s ratings are determined by our editorial staff. The scoring formula takes into account the factors we believe to be consumer-friendly, including the impact on credit scores, rates and fees, the customer experience and ethical lending practices.
APR 7.99-23.43%
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4.5 NerdWallet’s ratings are determined by our editorial staff. The scoring formula considers factors we consider to be a good choice for consumers, such as the impact on credit scores rate and fees customers’ experience, and responsible lending practices.
4.5 NerdWallet’s ratings are compiled by our editorial staff. The scoring algorithm takes into consideration factors we consider to be consumer-friendly, including impact to credit score, rates and fees customers’ experience, and responsible lending practices.
APR 11.69-35.93%
The amount of the loan is $1,000.
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5.0 NerdWallet’s rating is determined by our editorial staff. The scoring formula is based on the factors we believe to be consumer-friendly, including impact to credit score, rates and fees customers’ experience, and ethical lending practices.
5.0 NerdWallet’s ratings are compiled by our editorial staff. The scoring formula is based on aspects we believe are beneficial to the consumer, including impact on credit score, fees and rates customers’ experience, and responsible lending practices.
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4.5 NerdWallet’s ratings are determined by our editorial staff. The scoring formula takes into account aspects we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
4.5 NerdWallet’s ratings are determined by our editorial staff. The scoring algorithm takes into consideration factors we consider to be beneficial to the consumer, including impact on credit score, rates and fees, customer experience and responsible lending practices.
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Debt consolidation loan alternatives
If debt consolidation loans don’t fit your needs Here are some alternatives.
Other debt payoff methods
The debt snowball and debt Avalanche are two popular methods to pay off debt without consolidating.
It makes use of early wins to keep you on track towards becoming debt-free. In this method, debts are organized from the smallest balance to the biggest. When the debt with the lowest balance is paid and the payment per month is applied to the next lowest balance until it’s paid off. Then, you continue to roll payments toward each debt until you’re debt-free.
This is a very similar method that starts with the highest-interest debt. Then when that’s paid off, you tackle the second-highest-interest debt and so forth until all debts are paid. This strategy can save you money and ultimately time however, it does not have the quick wins of the snowball method.
Debt management plan
A debt management program from an independent credit counseling agency can help reduce the rate of interest and pay off debt faster. It’s an option for those who have debt on credit cards and you are able to stick to a payment plan for a long time without using credit cards.
>> MORE:
Bankruptcy
The option of releasing your debts through bankruptcy is an option if you are overwhelmed by debt, and will require five years or longer to pay it off through consolidation. In bankruptcy, you can eliminate all kinds of unsecure debt, such as credit cards and medical bills.
While your credit score may initially be affected but it will begin to improve within one year of declaring bankruptcy.
>> MORE:
Frequently asked questions: Can I qualify for debt consolidation with bad credit?
You can apply for a debt consolidation loan even having bad credit, and some debt consolidation lenders specifically offer loans to those with low credit scores.
How can I consolidate all my debt with bad credit?
A debt consolidation loan combines several unsecured loans — such as medical bills, credit cards and payday loans — into one monthly installment. A consolidating debt loan with poor credit might be a bit difficult however it is feasible.
Where can I find an installment loan with bad credit?
tend to be more favorable on low-credit loan applicants. also offer consolidation loans specifically for borrowers with bad credit.
Can I get debt consolidation with bad credit?
You are able to apply for a debt consolidation loan even having bad credit as certain lenders who specialize in debt consolidation cater to borrowers with low credit scores.
What can I do to consolidate my debts with bad credit?
A consolidation of multiple debts — like credit cards, medical bills or payday loans — into one monthly payment. A credit consolidation loan with poor credit might require shopping around but it’s possible.
Where can I find a consolidation loan with bad credit?
tend to be more favorable for bad credit loan applicants. Also, they offer debt consolidation loans specifically for borrowers with poor credit.
About the author: Jackie Veling covers personal loans for NerdWallet.
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