Debt consolidations were created to combine numerous debts into one, with preferably a lower interest rate. Being able to consolidate will help you pay your debts faster as they’ll be easier to manage. It may also provide you with that much-needed decrease in interest.
One question that’s often asked is if you can consolidate your debt if you have a bad credit score.
Yes, you can consolidate your debt if you have a bad credit score. Being eligible as a candidate for a debt consolidation loan with bad credit can be difficult, however, it is certainly not impossible.
Before consolidating your debts, make sure you understand the essential factors behind your loan. Factors such as your interest rate, additional fees, and the timeframe you have to pay the loan. Make sure you’re benefiting from switching to a debt consolidation loan before making the transition.
Benefits that you may encounter from consolidating your loans can be seen below:
By merging all your debts into one payment, you will make it much easier to plan yourself financially. By eliminating the juggling required to pay multiple payments, you’ll have a clear view of your debts. This can be beneficial if you do not know how to budget.
Instead of having to manage various debts and set goals for when you’ll pay each one, by consolidating your debts, you’ll be able to set goals for one payment. This makes it much easier and will motivate you to become debt-free.
Sometimes, you’ll be greeted by an interest that is much cheaper than your original debts from your consolidation lender. Meaning it may be quicker to pay your debts back as they’ll be more affordable. However, you may also find that the repayment period is longer, so be sure to explore all options.
How To Consolidate My Debt With Bad Credit
If you want to consolidate your debts but aren’t sure which steps are needed to apply for this type of loan, I suggest you read our simple how-to below.
1. Find out your credit score
First, you need to acquire your credit score. You’re able to do this online by using many credit checkers that won’t affect your current score.
2. Research lenders that offer loans to your credit band
Once you’ve got an accurate credit score, you’re able to research lenders that offer loans to individuals in your credit band. For those that have bad credit, you may find it challenging to find a lender. However, because your options are limited doesn’t necessarily mean you won’t find an appropriate loan.
3. Fill out the loan pre-qualification forms
When you’ve found a lender that’ll offer consolidation loans to your credit band, you need to apply for prequalification. This is simply a soft credit check that’ll reveal if you’re eligible for the loan and the terms you’ll be offered.
Note – Soft credit checks don’t affect your credit score. However, hard credit checks do.
4. Formally apply for the debt consolidation loan
After finishing the prequalification, you can then formally apply for the loan. To officially apply, the lender will have to perform a hard credit check, and this may briefly impact your credit score.
5. If the loan is approved, pay off your debt
If your application gets approved for the loan, the lender will typically deposit the money needed to pay off your debts within a couple of days. When you receive this money, you can pay all your debts and then start planning out how you will repay your consolidation loan.
Hopefully, this quick guide has been of use! Another one of our posts that may be of interest will show you how to stop spending money.
James Banerjee is a Senior Account Manager who graduated from the University of Kent in 2014. He works in SEO on clients such as HSBC UK and Nestle and he has a keen interest in personal finances and money-saving advice.