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A debt consolidation loan is a personal loan you use to pay off multiple existing loans. It typically has a lower interest rate than credit cards or payday loans, and it can help you get out of debt faster.
You can find unsecured debt consolidation loans for bad credit through a credit union or online lender. But be aware that applying for a new loan may cause a hard inquiry on your credit report, which could temporarily knock your score down.
Credit unions
If you have a poor credit score (defined as a FICO 1k loan score below 669 or a VantageScore below 661) and want to consolidate your debt, you can try a personal loan or other types of loans from banks, online lenders, and credit unions. It’s best to shop around and compare the options to find the one that best fits your needs. Consider the interest rates, repayment terms, fees, and eligibility requirements.
Credit unions are a good place to start, as they are typically more willing than banks and online lenders to offer loans to people with bad credit. Some even specialize in providing debt consolidation loans to their members. You’ll need to be a member of the credit union to apply, which means living or working nearby and paying a small membership fee.
A personal debt consolidation loan can help you pay off all of your outstanding debts and combine them into one payment, which could save you money in the long run. A debt consolidation loan also typically has a lower interest rate than other forms of debt, which can reduce your total payments and help you get out of debt faster.
Debt consolidation loans are typically unsecured, which means you won’t need to put up an asset as collateral against the loan. However, you may have better chances of qualifying for a debt consolidation loan if you take steps to improve your credit score or increase your income.
Online lenders
Credit consolidation loans can reduce your interest rates and combine multiple debts into a single monthly payment. They are available from banks, credit unions and some online lenders. They typically offer large amounts of money and repayment terms up to seven years, so they’re ideal for paying off expensive debt from credit cards or medical bills. However, you should never accept the first loan offer that you come across. Instead, compare several personal loans to find the best one for your situation.
Before you apply for a debt consolidation loan, check your credit report and score for free with Experian. A clean credit report is essential for getting approved and receiving the lowest possible interest rates. You can also boost your credit by paying off existing debts and keeping up with payments on time.
The minimum credit scores required for debt consolidation loans vary, but they usually fall in the mid-600s. You may be able to get approved for a loan with a lower score if you can provide evidence of steady income, such as pay stubs, bank statements or tax returns. If you have a low credit score, it’s also worth looking into third-party debt settlement options.
These plans involve paying into a savings account in your name, which then goes toward settling debts for less than you owe. But these plans are a risky way to consolidate debt and can damage your credit even more than just taking out a high-interest debt consolidation loan.
WalletHub’s ratings
A debt consolidation loan is a type of personal loan that you use to pay off multiple existing credit card and other debts. It can help you get your finances under control by reducing your interest rates and combining your payments into one monthly payment. However, before you apply, it’s important to consider why you’re in debt and whether a debt consolidation loan is right for you.
A debt consolidation lender will run a credit check to determine whether you’re eligible for the loan. Then, you’ll usually receive funds into your bank account once the lender approves your application. Use the funds to pay off your existing creditors. Be sure to make your payments on time each month. This will help you improve your credit and qualify for better terms on future financial products.
You should also consider other options to tackle your debt, such as a debt management plan or a bankruptcy. A nonprofit credit counseling agency can review your income and expenses to create a budget that fits your needs and help you choose the best way to eliminate your debt.
When choosing a debt consolidation lender, be sure to consider the minimum and maximum loan amounts and repayment terms. You can also check the lender’s customer service ratings on WalletHub to see how other customers have rated their experience.
Tips
There are several things you can do to increase your chances of qualifying for a debt consolidation loan with bad credit. One is to check your credit report and score for free at Experian. This will help you spot errors and boost your odds of obtaining a debt consolidation loan with a lower interest rate. Another is to add a cosigner or co-borrower with good credit. This can boost your borrowing power and lower the risk to lenders, which could help you qualify for a higher loan amount or a lower interest rate.
