Debt Consolidation Loans With Bad Credit

A debt consolidation loan can help you get a lot of debt under control, and you can save on interest costs with a much lower interest rate. But getting debt consolidation loans with bad credit seems to be a difficult thing. Lenders may be reluctant to approve your application, and those who approve you will most likely charge high-interest rates or fees.

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Of course, consolidating debt when you have bad credit is a complicated numbers game that requires patience and perseverance to succeed.

Consolidation Loan With Low Credit Score

If you have bad credit, it's a good idea to explore your options. But it's important to know that the options may be limited and expensive, and predatory lenders may target borrowers in your situation. In some cases, you may be better off paying off existing debt without applying for a new loan.

What is Debt Consolidation?

Debt consolidation is combining all of your unsecured debt payments into one payment, usually at a lower interest rate. There are two ways to consolidate your debts:

  1. With a loan (known as a debt consolidation loan) or
  2. No loans (non-profit debt management).

What is a debt consolidation loan? This is a way to pay off your debt with an umbrella loan that you get from a local bank, credit union, online lender, or friend or family member.

Options For Debt Consolidation Loans for Bad Loans

With so many lenders out there, it can be hard to know where to start looking. Here are some good places to start.

1. Your Local Credit Union

Since credit unions are nonprofits owned by their members, they usually offer loans on better terms than you can get from a traditional bank.

They may also have more leeway to lend to members whose credit isn't in good shape, especially if you've built a positive relationship with them.

If you're a member of a credit union, talk to a loan officer about qualifying for a personal loan. Credit unions may look beyond your low credit score and take into account your entire financial history, personal circumstances, and your relationship with the institution.

2. Online Lenders

Online lenders like LendingClub, Starter, and Avant are good places to look for debt consolidation loans if you have bad credit.

With online lenders, you can often:

  • Compare rates without affecting your credit score
  • Apply quickly and easily, without paperwork or visiting branches in person
  • Get funded within a week, or even in just one business day

Online lenders may be more likely to approve you for bad credit loans than traditional banks.

3. Your Home Equity

If you own a home and have significant equity in it, you may be able to take out a home equity loan to consolidate your debt.

It's not technically a debt consolidation loan for bad credit, but it can help you get a low-interest rate because the loan is secured by your home.

But there's one downside: if you default on a home equity loan, lenders can foreclose on your home to recoup the loan amount. So it is best to pursue this option only if you are sure that you will not have problems paying debts.

4. Predatory Lenders

Some debt consolidation lenders are predatory, and this is especially true for lenders who work with people who have low credit scores. They will often charge very high-interest rates.

Online companies like LendUp and OppLoans, for example, charge triple-digit APRs. That said, they are nowhere near as expensive as payday loans, which typically charge an APR of 400 percent or higher.

Avoid this type of lender at all costs. Receiving a loan with such a high-interest rate can be very expensive and cause you to fall further into debt.

Hopefully this information about "debt consolidation loans with bad credit" is useful.


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