Debt consolidation is a way of taking a new loan to pay off high-interest debt. This will help you save money and streamline your monthly payments.
To get this loan, you will need to have a high credit score. Generally, debt consolidation will be rejected if your credit score is low. So, how to get a debt consolidation loan with bad credit?
What Credit Scores Do I Need To Get A Debt Consolidation Loan?
The answer depends on your credit card scoring model because different models require to have different ranges. However, scores that fall under 589 are generally considered low. This is true in the cases of FICO Score 8 and FICO Score 9 models.
Also, scores that fall anywhere between 580 and 739 are generally considered to be fair. There are more chances of getting a debt consolidation when the score is more than 580.
If the scores are above 800 are considered to be excellent. This means you will most certainly get debt consolidation.
How To Get A Debt Consolidation Loan With Bad Credit?
Current Credit Management
You can reach out to your creditors to manage your current credit score. They may be able to help you in many ways.
You can negotiate with them about the terms and conditions regarding repayment terms. Make sure to change them to something that you can manage.
APR Balance Transfer Credit Card
Consider using a zero percent APR balance transfer credit card. This can help you want to pay off the credit card debt. You can transfer the balance with an introductory APR credit card.
You can take a professional’s help to aid you in settling poor credit scores. A credit counselor can craft a plan that can help you get the debt consolidation sooner. Also, this service is usually free, and you do not have to worry about spending too much money.
Analyze Your Credit Report
The chances of mistakes on your credit report are very low. However, it can not be shrugged off as impossible.
Maybe your credit score is so low because of some mistakes in the report. There may be inaccurate payment details or a wrong credit limit.
Also, a small mistake in the credit report can decrease the odds of qualifying for debt consolidation. Hence, if you find a mistake and immediately rectify it, your scores can improve considerably.
Add A Co-signer
Some debt consolidation lenders allow you to add a co-signer. This can help you get a debt consolidation or lower your interest rate. Furthermore, the credit score of the co-signer must be higher than the minimum request. Also, remember that co-signer is equally responsible for the loan.
Where Can I Get A Debt Consolidation Loan For Bad Credit?
Online lenders complete the entire process online, and you will get the funds in few days. However, they have some of the highest interest rates.
The poorer your credit score is, the more the interest rate will be. Also, online lenders can charge origination fees to cover the process.
Credit unions are non-profit organizations that can offer you debt consolidation for lower interest rates. The federal limit for the annual interest percentage is 18%. This figure is lower than the upper limits of many online lenders.
To apply for a loan with the credit unions, you will need to become a member of the credit union. Also, you have to pay a small fee for the membership.
There are several alternatives for debt consolidation as well. It includes bankruptcy and the debt snowball method. Nevertheless, you can go with the method that works the best for you. Besides, you should always explore other options before committing to anything.