What is a bad credit debt consolidation loan?

 

Debt consolidation loans for bad credit 2023

What is a bad credit debt consolidation loan?

A bad credit debt consolidation loan works in the same way as a standard debt consolidation loan but is easier to apply for.

With a consolidation loan, you bring roll-up all your existing debts into one new loan. This means you only have one monthly payment to worry about. And providing the consolidation loan rate is lower than on the debts you're transferring, you should save money. 

Even better, some consolidation loan providers are willing to lend to people who have had problems with credit in the past. Unfortunately, because lenders tend to view people with a bad credit score as a greater risk, they charge them higher interest rates and may limit how much they can borrow.

What kinds of debt consolidation loans are available?

Two broad types of debt consolidation loan are available. They are:

Secured debt consolidation loans

This type of debt consolidation requires you to have equity in one or more properties, as the loan will be secured against it.

Secured debt consolidation loans offer two main advantages over non-secured loans: you should be able to borrow a much larger amount and secure a lower interest rate.

On the other hand, you could lose your home if you’re unable to keep up with repayments and default on the loan.

Unsecured debt consolidation loans

This type of loan doesn’t require you to be a homeowner. Your ability to repay the loan and your credit history are the two principal factors that determine whether you are accepted for an unsecured debt consolidation loan.

This means that you may struggle to be approved for these loans if you have a poor credit score. If you do qualify, you may not be able to borrow as much as others and you may be stuck with a higher interest rate.

Can I apply for debt consolidation with bad credit?

Generally, the lower your credit score, the higher the interest rates lenders will offer you on financing. You'll have to meet the lender's minimum requirement to qualify for a debt consolidation loan. This is often in the mid-600 range, although some bad-credit lenders may accept scores as low as 580.

How do I get out of debt with no money and bad credit?

You can get out of debt with no money and bad credit with the help of a debt management program or a loan from a friend or family member. You should also look into getting a debt consolidation loan for bad credit, especially if you have some income despite not having any money saved.

Can I get a loan to clear my debts?

A debt consolidation loan can make repayments easier

A debt consolidation loan can solve both problems by pulling all your debt into a single loan. This reduces the amount of fees you pay and makes repayment a lot simpler. Gone are the worries that you'll miss a repayment or miscalculate your monthly budget.

Do they check credit for debt consolidation?

Debt consolidation loans can hurt your credit, but it's only temporary. The lender will perform a credit check when you apply for a debt consolidation loan. This will result in a hard inquiry, which could lower your credit score by 10 points