Do I Qualify For Debt Consolidation Loans With Bad Credit?

do i qualify for debt consolidation loans bad credit

Are you thinking of taking out a consolidation loan? Smart move! 

Debt consolidation is an effective way to repay your debts and find financial freedom. When you have multiple loans charging high interest rates, it makes financial sense to consolidate them into one loan. 

Sounds exciting, right? 

The only problem is not everyone qualifies for a consolidation loan. Especially if you have bad credit, it’s natural to worry about getting approved for a consolidation loan. 

So, is it possible to qualify for debt consolidation loans with bad credit? 

Keep reading to find out. 

How Debt Consolidation Loans Work 

Before digging into your bad credit situation, it’s important to have a good understanding of how credit consolidation works. 

Let’s say you have the following loans: 

• Auto loan – $9,000 at 9% per annum 
• Credit card -- $5,000 at 11% per annum 
• Personal loan -- $2,000 at 6% annum 

To consolidate these loans, you’ll have to take out a $16,000 loan. You’ll then use the money to pay off these loans. Since the weighted average for these loans is 8.6%, you will get a lower rate. 

The interest rate charged on your debt consolidation loan will depend on a range of factors, including your current credit and income level. 

The Requirements For Getting A Debt Consolidation Loan 

The requirements for getting a debt consolidation loan vary from lender to lender. 

Typically, though, you’ll need to have good credit (anything above 630) and provide proof that you have the ability to repay the loan. In most cases, lenders want your paystubs if you’re in formal employment, or if you’re in self-employment, your business’ bank statements. 

Some lenders might look at the age of some of your existing loans. 

Can You Get Debt Consolidation Loans With Bad Credit? 

Clearly, lenders want to do business with consolidation loan borrowers who have good credit. However, this doesn’t mean your chances of getting approved for this loan are gone. It just gets harder, but not impossible. 

The consequence of getting approved for a consolidation loan with bad credit is you’ll not get the cheapest interest rate. It’s important to check and ensure that you’re getting a rate that’s lower than the weighted rate of all the loans you want to consolidate; otherwise, the consolidation loan won’t make any financial sense. 

How To Improve Your Chances Of Getting A Consolidation Loan With Bad Credit 

There are steps you can take to enhance your chances of getting approved for a consolidation loan. 

One, focus on proving your ability to repay the loan. If you’ve got a job, you can offer to back up the loan with a valuable asset, such as a house. In some instances, it might be better to go for a secured debt consolidation loan instead of an unsecured one. 

Two, try to improve your credit before making the application. Sometimes a simple thing, such as correcting a clerical error on a credit report or paying off a late bill is all your credit needs to improve. 

Third, it’s advisable to use the services of a debt consolidation specialist, like Debthunch. Wondering who is Debthunch? Check out their page. 

You Can Get A Consolidation Loan With Bad Credit 

Debt consolidation is an ideal debt management strategy. If you have bad credit, though, things can be a bit complicated. With this guide though, you now know how to get debt consolidation loans with bad credit. 

Keep tabs on our blog for more money tips and insights. Visit the Loan section of our blog right now.

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