When you’re dealing with a mountain of unsecured debt, a debt consolidation loan can be a useful way to pay off all of your debts and focus on one monthly payment. However, what about a debt consolidation loan with very bad credit? This may take some shopping to find a lender willing to work with you if your FICO credit score is below 580. However, it is possible to consolidate your debt even if your credit score is not ideal.
Can I Qualify for a Very Bad Credit Debt Consolidation Loan?
Whether or not you qualify for a debt consolidation loan with very bad credit depends on the lender. Lenders check your creditworthiness, income, and debt-to-income ratio (DTI) to determine the risk of a loan default. Lenders usually prefer a credit score of 650 or higher, although that does not mean that there are no lenders who do not accept lower credit scores. However, expect a higher interest rate on the loan.
How to get a debt consolidation loan with very bad credit
Use these steps to help you find the right lender for a Debt Consolidation Loans With A Bad Credit Score.
1. Check your credit report
You should be familiar with your credit history and your credit report first. Lenders will largely base their decision on your score and credit rating and will expect you to meet the minimum requirements. Another reason to check your credit report regularly is to check for errors. You can check your credit report once a year for free at any of the three credit bureaus. Once you know your full credit picture, it will get easier when you buy a lender who may be ready to work with you.
2. Do your research
Do your research and don’t accept the first offer you get. Compare loan amounts, repayment terms, fees, and interest rates from multiple lenders. It may be slow and tedious, but you could end up saving hundreds of dollars or more. You can pre-qualify with online lenders and view their estimated interest rates. This usually involves a soft credit withdrawal that doesn’t affect your credit score.
3. Add a co-signer
Another option if you are looking for a debt consolidation loan with very bad credit and you don’t qualify yourself is to include a co-signer on the loan. Typically, the co-signer’s creditworthiness must meet or exceed the minimum requirements set by the lender. Note that the co-signer is taking a risk as you and the co-signer are both equally responsible for the loan. Failure to make payments on time could cause harm to the other person.
If you can find a co-signer, you may get the following benefits:
- Increased chances of getting approved
- Favorable conditions
4. Improve your credit score, or DTI
If you’re in no hurry or struggling to meet the minimum requirements for a debt consolidation loan, consider improving your credit score and debt to income ratio. You can improve your bankroll and DTI by focusing on smaller debts and making payments on time. Cut down on all unnecessary expenses like subscription services and other memberships.
Where Can You Get a Debt Consolidation Loan With Bad Credit?
There are many lenders in the United States, but here are some places to start your search.
Credit unions are not-for-profit organizations that may be willing to offer you lower interest rates and flexible terms, but you need to become a member first. Federal credit unions have one 18% upper interest rate limitwhich is lower than the limit for online lenders. The downside is that the credit unions won’t allow you to qualify for a loan and that a tough credit check may be required. Hard credit checks temporarily lower your credit score.
Both Navy Federal Credit Union and First Tech Federal Credit Union offer personal loans to help consolidate your debt with no origination fees, low interest rates, and no minimum credit requirements.
Online lenders may be more likely to approve you for a debt consolidation loan with very bad credit. With an online lender, it is easier to compare interest rates, it is quick to apply, and you can usually get money in a week. However, online lenders usually charge higher APRs when it comes to a debt consolidation loan with very bad credit. Do your research before choosing an online lender.
Is A Debt Consolidation Loan With Very Bad Credit A Good Idea?
Is a Debt Consolidation Loans Right For You? Every situation is different and it may be in your best interest to improve your credit score before applying for a cheaper debt consolidation loan. However, if you need a debt consolidation loan with very bad credit ASAP, check with your local bank, credit unions, or do the research with online lenders.