Frequently Asked Questions
How can you get a debt consolidation loan with bad credit?
Getting debt consolidation with bad credit can limit your choices, but finding a lender isn’t impossible. First, it’s a good idea to check your credit score to see where you stand, then research lenders who have lower credit requirements to increase your chances of being approved.
Even though your options may be limited, you’ll want to shop around and compare lenders to see who will offer you the best rates and terms. Then compare that to the rates you’re currently paying on existing debt to see if it’s worth making the switch.
Where can you get a debt consolidation loan with bad credit?
Credit unions and online lenders tend to offer better rates for those with poor credit. Credit unions are great if you’re interested in in-person service, but in most cases you’ll need to become a member (usually by paying an annual fee or opening a savings account) in order to be approved for one. ready.
Online lenders, on the other hand, usually don’t require you to become a member. while providing the same types of customer service online or by phone. However, if you’re not comfortable with managing and paying your loan online, this may not be the best choice.
What credit score do you need to get a debt consolidation loan?
Generally, the higher your credit score, the better your chances of getting a debt consolidation loan. Although many lenders on our list require a minimum credit score of 580 or 600, you may need to meet other requirements, such as a certain annual income and debt to income ratio limits, to be approved.
What is the best way to consolidate debt?
Along with researching debt consolidation loans, one of the best ways to get approved for a competitive rate is to add a co-signer. Ideally, this should be someone with a good credit profile, better than yours, who you trust and who understands the responsibilities and consequences of co-signing a loan. Alternatively, you can work to improve your debt-to-income ratio by increasing your income or paying off more debt before submitting an application.
Choice
Home Equity Loan
This type of loan consists of tapping into the equity in your home and can offer a low interest rate, as it is a secured ready. A major risk is that you are using your house as collateral, which means that if you do not repay the loan, you risk foreclosure.
Debt Management Plan (DMP)
You can work with a certified credit counselor to reduce fees with your creditors. Then you will consolidate your payments, making one payment to your advisor, who will then pay your creditors. It can save you money, but most advisors charge a monthly fee. Also, a DMP takes a few years to complete.
Bankruptcy
Filing for bankruptcy can help you cancel your debt or negotiate an agreement with your creditors. However, you will damage your credit, which will make it much more difficult to approve certain loans in the future.
The essential
Having bad credit does not mean that there are no debt consolidation options for you. This could mean you’ll qualify for a higher APR than someone who’s more creditworthy, but as long as the rate is lower than what you’re currently paying, it can save you hundreds or even thousands of dollars in the long run. term. .
Compare what’s available and learn what it takes to increase your chances of approval to improve your financial situation. If you find that a personal loan isn’t the best choice for you, research the alternatives and see if you’re up to the risk. In some cases, it’s also best to wait until your credit situation improves so that lenders are more likely to approve a loan for you with terms and rates you agree with.
How We Choose The Best Bad Credit Debt Consolidation Loans
Investopedia is dedicated to providing consumers with unbiased and comprehensive reviews of personal lenders for all borrowing needs. We’ve collected over 25 data points from over 50 lenders, including interest rates, fees, loan amounts and repayment terms, to ensure our content helps users make the right decision. borrowing decision based on their needs.
