Finding A Debt Consolidation Loan For Bad Credit
Debt is tough to deal with. It can be an even bigger problem when you also have poor credit. Your options are more limited because it’s harder to get a debt consolidation loan, particularly one with lower interest. However with some effort, you can find relief. Here’s what you need to know about finding a debt consolidation loan for bad credit.
What Is A Debt Consolidation Loan?
Consolidation is a form of debt refinancing in which a loan is taken out to pay off other loans. Such a loan combines your debts under a single account. You make a single payment, usually monthly, making it easier to manage your finances. A debt consolidation loan could also carry a lower interest rate than you’re now paying on other debts.
Improve Your Credit
A debt consolidation loan can help you pay off your debt sooner, which may ultimately improve your credit utilization rate. This can potentially raise your credit score. Handling the loan responsibly can also improve your payment history, which is another factor in credit scoring.
What Are The Credit Scores Needed For A Debt Consolidation Loan?
In general, credit scores of 579 and below are usually considered poor. Scores in this neighborhood can make it hard to get a consolidation loan at all, lrt alone one with favorable rates and terms.
By contrast, scores between 580 and 739 are generally deemed fair or good, giving you a better shot of a loan at good rates. Scores of 800 and over are even better. Remember, though, lenders also consider factors other than credit scores when considering your loan application.
Getting A Loan With Bad Credit
Your first goal regarding a debt consolidation loan for a bad credit score is getting approved. Yes, your poor credit is an obstacle, but remember lenders consider other factors including your debt-to-income ratio and credit history.
Also note that if you are approved for a debt consolidation loan with less than stellar credit, you may encounter relatively higher interest rates.
Have A Plan
Finding a debt consolidation loan for bad credit requires certain measures, including doing what you can to shore up your credit. Get a copy of your report from all three credit agencies and correct any errors that might be negatively affecting your score.
Also, knowing your score could give you a better idea of where you should apply and where you probably won’t qualify. Experian’s CreditMatch resources can help you locate a personalized loan based on your credit score.
Shop Around
Now that you know where your credit stands, do some comparison shopping to see what terms lenders are offering. Obtaining quotes from multiple lenders can give you an idea of what options may be out there. Seeking prequalification for a loan can give you an idea of your prospects for loan approval, without actually applying, which would reduce your credit score.
Enlarge Your Search
If you have dinged credit, you’ll need to look high and low for the best loan terms. You may be able to get more loan flexibility at a credit union. These institutions focus on their members, so there’s a chance they’ll put less emphasis on your credit score if your history with them is good.
Also, there are online lenders that might do business with consumers who have had credit woes. You may want to consider getting a co-signer to help you qualify for a loan, and at lower rates as well. Finding a debt consolidation loan for bad credit is not easy, but with some preparation and legwork, you may be able to do it.
