How Consolidation Loans Can Help When You Have Bad Credit

In this article, we will be exploring consolidation loans and how they can help you when you have bad credit or debts that have built up, which you may be struggling to pay.

Are you struggling to keep up with your bills because you have too much debt? Are you worried about how you will ever get out of this mess?

You may be interested in a debt consolidation loan. A debt consolidation loan can help you get your finances under control by consolidating all of your debts into one monthly payment.

It can be a great solution for people who have bad credit. In this article, we will discuss how to consolidate your debts with a loan.

What Are Debt Consolidation Loans?

A debt consolidation loan is a loan that you take out to pay off your other debts. It consolidates all of your debts into one monthly payment so that you can more easily manage your finances.

Who are Debt Consolidation Loans For?

Debt consolidation loans are for people who have multiple debts that they are struggling to keep up with. If you have bad credit, it can be difficult to qualify for a traditional loan.

However, there are lenders who specialise in loans for people with bad credit. A debt consolidation loan can help you get your finances under control by consolidating all of your debts into one monthly payment.

It is a great solution for people who have bad credit and are struggling to keep up with their bills.

How Does a Debt Consolidation Loan Work?

An unsecured debt consolidation loan is a personal loan that allows you to clear your other debts without using your home and other high priced items you may have in possession.

You can borrow a maximum of £25,000, but if you need more, go for the secured debt consolidation loan.

A secured debt consolidation loan allows you to borrow over £25,000. But, you have to put up your home and car for the repayment. If you fail to repay, your home could be at risk of repossession.

What is a Bad Credit Score?

In relation to the FICO score, a bad credit score is anything below 670. A credit score between 300-579 is very bad, while 580-669 is actually regarded as fair.

What are likely Loans for those with Bad Credit?

The three types of loans for bad credit are:

• Secured loans
• Guarantor loans – Family or friend will pay your debt
• Unsecured loans such as personal loans.

How to get a Loan with Bad Credit?

If you have a bad credit score, you may struggle to get a debt consolidation loan.

1. Look at your credit rating – Ask for a copy of your credit file from Experian, Equifax and TransUnion. If you have a low credit score, increase your credit score first before applying for a debt consolidation loan.
2. Select the type of loan – Choose either a secured loan, guarantor loan or personal loans.
3. Compare loans – You can use loan comparison websites such as Compare The Market and MoneySupermarket.
4. Apply for a deal – Apply to your chosen loan provider and wait for the decision whether they accepted your application.
5. Get the money – You will receive your money when they granted your application.

How Long Does A Debt Consolidation Loan Last For?

Around 1-7 years.

Why Debt Consolidation Could Be A Bad Choice For You

• It will not reduce or write off your debts.
• There is lower chance that your debt consolidation loan application will be granted when you have a bad credit score.
• Payments are required once they approve your loan application.
• It might not consist of all your debt.

What Are The Alternatives To A Debt Consolidation Loan?

• Balance transfer cards – It has no interest rate and lets you transfer debt from other credit cards, or have a balance transfer check to mix other debts. You can apply for a balance transfer card from banks.
• HELOC/ Home equity loan – HELOC is a form of home equity loan that lets you take out funds when you require them with variable interest rate. Home equity loans lets you borrow against your home equity; it has fixed interest rate with fixed monthly payment. You can get HELOC and home equity loan from banks.
• Cash-out refinancing – This replaces your current home loan with a bigger mortgage.
• Debt settlement – This is an agreement between the lender and borrower for a huge one-time payment towards an existing balance. Then, the credit card business can remove or forgive the debt that’s left.
• File for bankruptcy – You can apply for bankruptcy if you cannot pay your debt.

To Summarise:

1. You can take out a debt consolidation loan if you need to pay off debts.
2. A bad credit score is below 670.
3. The three main types of debt consolidation loans are: Secure loans, Guarantor loans and Personal loans.
4. Check your credit rating regularly and use loan comparison websites when deciding the type of loan to apply for.
5. Debt consolidation loans last around 1-7 years. It will not write off your debt, you will have to pay once they grant your loan application, and it might not cover all your debts.

If you are still unsure or require further advice, why not contact Consumer Debt Help. We can offer you a solution and insights to help you make decisions regarding your debt.

You can download our free E-Book here, which offers 10 simple tips on how to quickly get out of debts.