Eeven for people in UNITED STATES who have bad credit, there are options for debt consolidation loans, including loans from credit unions and online lenders.
Some lenders even offer special services to customers with poor credit (a FICO score below 630) and consider other aspects besides the score, such as education, income, and work history.
However, you may need to spend some time researching your possibilities.
What exactly is a debt consolidation loan?
A debt consolidation loan is a personal loan that you use to combine and pay off several obligations at oncesuch as credit card balances, medical bills or other unsecured personal loans, leaving you with one monthly payment.
This payment should ideally have a lower interest rate than your existing loans so you can save money and pay off your debts faster.
How to get a debt consolidation loan if you have bad credit
1. Check your credit report
Is a bad credit score the result of errors in your credit report? Check for errors, including inaccurate credit limits, misreported payments, or inappropriate accounts.
By using AnnualCreditReport.com, you can check your credit report each week for free from each of the three major credit bureaus: Experian, Equifax and TransUnion.
Your chances of being approved for a debt consolidation loan can increase even a little with a small increase in credit rating. A loan with a lower interest rate may be available if your credit goes from poor to fair (a FICO score of 630 to 689).
2. Improve your debt ratio
Consider alternatives to increasing your income and paying off smaller obligations if you don’t immediately need to consolidate your debts.
The debt-to-income ratio, which lenders use to gauge your ability to repay a loan, is improved.
A lender is more likely to approve your loan application if your DTI ratio is lower.
3. Add a co-signer
Co-signers are allowed by some lenders, which can improve your chances of approval and a lower interest rate.
The co-credit signer’s score must often be at least as good as the lender’s minimum requirement.
Remember that a co-signer takes equal responsibility for the loan. Your co-credit signer’s score can suffer if you fail to repay the loan or miss payments.
To obtain a loan whose payments respect your budget, compare the conditions and interest rates offered by several lenders.
Most internet lenders allow you to pre-qualify and view rates ahead of time. There will be a light credit check involved in this, which will not lower your credit score.