About 30% of American’s have bad credit. This is a credit score that can range from 300-500.
When you’re ready to be free from the clutches of debt and seek debt consolidation, bad credit can follow you and make you look risky to lenders. And applying for too many loans can do more damage to your credit score.
Read on to find out how you can acquire debt consolidation loans for bad credit.
What Is a Debt Consolidation Loan?
Simply put, debt consolidation is a loan that is used for the sole purpose of paying off your debt. You can use this loan to pay off various debts like credit cards, medical debt, student loans, or others.
Typically interest rates are lower than credit cards for debt consolidation loans. The trouble comes when your credit score is bad, which means your interest rate could be significantly higher than someone with a better score.
Debt Consolidation Loans for Bad Credit
So you’re up to your neck in debt, but with bad credit, a solution seems impossible. Thankfully, there are other options available to you if you’re unable to secure a loan.
Consult a Credit Union
Credit unions specialize in helping those with bad credit or in building their credit. Even if you have less-than-stellar credit, you could still get loan, but the interest rate would be higher.
Debt settlement is another possibility to relieve you of your debt.
These companies work on your behalf with your creditors to get your debts reduced. In turn, you will pay off the remaining balances over a short period of time. This service is charged a fee, and each debt settlement company has their own way of how they charge.
However, your credit will take a deeper hit than you already have. If you’re looking to salvage your credit, do some research on debt settlement companies.
Attack Your Debt Head On
Sometimes a debt consolidation loan isn’t necessary for smaller debts. If your debt is on a smaller scale, consider taking up an extra job, making a budget, and cutting back on expenses to tackle those smaller debts. Taking out a loan could cost you more time and money.
Home Equity Loans and Lines of Credit
If you have equity in your home, you could apply for a home equity loan or line of credit. With a loan, you receive a lump sum of cash, and a line of credit works similar to a credit card.
While the interest rates are usually lower than debt consolidation loans, to get a good rate, your score would need to be above 600 or higher.
The negative side of these loans is that they use your home as collateral. If you miss a payment or fall behind, you could lose your home.
Debt Consolidation: Options for Those with Bad Credit
Debt can seem mountainous, but it’s not an impossible climb to healthier finances. Debt consolidation loans for bad credit are doable with a little research and a lot of hard work.
Looking for more information on loans? We’ve helped people from all walks of life with their finances. Visit our learning center today for more information.
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