July 9, 2020

Can you get a debt consolidation loan if you have bad credit?


Crystal Group

“If you are, a debt consolidation loan could be the best way of simplifying things. Even reducing the amount of interest you pay on your debts.”

So, what is a debt consolidation loan and can you get one if you have less than perfect credit?

Are you struggling to make multiple debt repayments every month?

What is a debt consolidation loan?

A debt consolidation loan allows you to move all of your existing debts from multiple creditors to one account. To do this, you would pay off and close all your old accounts using the credit from your new debt consolidation loan.

A debt consolidation loan doesn’t mean that you’ve cleared all your debts, but they will be all in one place. Each month you’ll make just one payment, instead of having to juggle multiple repayments. That will make it much easier for you to organise your monthly budget and keep on top of what you owe.

Taking out one loan and using it to consolidate debts can also save you a fortune in interest, especially if your debts are tied to high-interest credit cards.

Can you have a debt consolidation loan if you have a bad credit score?

You may still be able to get a debt consolidation loan if you have a poor credit score.

However, secured loans are generally more readily approved than unsecured loans. That’s because the lender uses an asset, usually your property, as collateral to reduce their risk. The downside is that you could lose the asset if you fail to keep up-to-date with repayments on the loan.

guarantor loan is another option for you if you have bad credit. With a guarantor loan, you’ll need to have a friend, family member, or business associate to promise to make your repayments if you can’t. This approach presents risks to both parties. So be sure that you can meet the repayments before both you and your guarantor sign on the dotted line.

Some lenders will offer debt consolidation loans to people with bad credit. If you have a credit score below 660, you may be able to get a loan, but the interest rate charged by the lender will be high, commensurate with the risk you present. The good news is that your credit score will improve once you begin to make inroads into your debt.

In conclusion

A debt consolidation loan can be a good way of organising your debt repayments and saving you interest.

If you have a poor credit score, you can still get a debt consolidation loan from some lenders. However you will pay a higher interest rate. Also, you’re more likely to be considered for a loan if you have an asset such as a property on which the debt can be secured.

For more advice on whether a debt consolidation loan would be a good option for you, talk to an experienced debt advisor.

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