How To Get Debt Consolidation Loans For Bad Credit Scores

Disclaimer: We are not qualified legal or tax professionals and are not giving advice. Always speak with a qualified professional before making any legal or financial decisions.



Feeling trapped by bad credit and overwhelmed by mounting debts? The path to financial freedom might lie in debt consolidation loans.

Join us as we learn the intricacies of securing debt consolidation loans despite challenging credit scores, offering actionable insights to alleviate your financial burden.

If you'd rather speak to a debt specialist now, click here for a free consultation.

What Credit Score Do I Need?

To get the best interest rates, you need a credit score of 700 or above. Interest rates range from 5.99% to 35.99%. The better your credit score, the lower the interest rate. If your credit score is between 640 and 699, you’ll be charged interest rates at the upper end of that range.

Are Debt Consolidation Loans for Bad Credit Scores Available

If your credit falls below 640, it is very difficult to get a debt consolidation loan with a decent interest rate. Unfortunately, many lenders who lend to people with poor credit scores are predatory. They take advantage of your situation and charge interest levels that will hurt you and your efforts.

Some online companies charge interest rates of up to 400%. Payday loan consolidation interest rates often begin at 400%. This means that if you take out $100, you will pay a minimum of $400 to the loan company. There is no way that a predatory loan is going to help you! 

What Are My Debt Consolidation Loan Options with Bad Credit?

There are several options for best debt consolidation loans other than payday lenders and other predatory options.

If you belong to a credit union, you may be able to get a loan with better terms. Credit unions are not bound by the same rules as banks. It’s worth talking to a loan officer about qualifying for a personal loan.

Online lenders range from predatory to honorable. Take the time to investigate several companies and compare rates, terms, and all your options. Certain online lenders like LendingClub, Upstart, and Avant have good reputations and may offer the best debt consolidation loans.

Chase Bank offers personal loans for bad credit. Chase calls this a signature loan (a type of unsecured loan). Their interest rates and terms vary based on credit score, amount, and other factors.

The last option is to take out a home equity loan. You must own a home with equity (what you’ve paid toward the loan or if the house has increased in value).

Home equity loans come in several types: the home equity loan or second mortgage; a home equity line of credit; and a cash-out refinance. The HELOC (home equity line of credit) works similarly to a credit card. You can borrow money up to a certain limit and must make monthly payments against the loan.

The cash-out refinance is a new mortgage for more than you currently owe. The extra funds are used to pay off debt. Home equity loans come with lower interest rates, but that is because the loan is secured by your house. If you fail to pay, your home can be foreclosed. 

Are There Any Debt Consolidation Loan Alternatives for Bad Credit?

There are some alternatives to taking out a loan for people with bad credit. One way is to take a look at your budget and cut costs if possible so you can free up money. Track your spending (including cash) for a month and see exactly where you are spending money. Cut what you can and then focus on paying off your debts.

You can also talk to your creditors to see if they will lower interest rates or work with you to lower what you owe. You may also ask to have your due date adjusted. If you have more money after one paycheck, ask to have your due date moved to just after that paycheck. You’ll save on late fees.

Credit counseling works with you to create a debt management plan. They will “consolidate” your debt and you will make one payment a month. Credit counselors will work with creditors to lower interest rates.

If you have an asset like a vehicle or other item of value, you may be able to take out a secured loan, using that asset as collateral. You generally get a lower interest rate, but you can also lose that asset if you default on your payments.

Another option is bankruptcy. Most of your debts could be wiped away with a BK and you might be able to enjoy a fresh start. However, bankruptcy proceedings are expensive, complicated, and may require hiring a lawyer. Your credit is destroyed for up to ten years and there is a huge stigma about declaring bankruptcy.

Tips to Getting a Debt Consolidation Loan for Bad Credit

Besides not taking a loan out with a predatory lender or trying some of the other options listed above, the best option might be knowing how to improve your credit score. Check your scores on Equifax, Transunion, and Experian. Request a credit report form each – you are entitled to one free report per year – and see what you can do to improve your credit score.

Once you know your credit score, you’ll have a better idea of your options. Shop around! Look at several lenders and the other options we’ve listed. Know the interest rate, fees, and repayment terms, and read that pesky small print for hidden charges.

Would a Debt Consolidation Loan Help?

The answer to this is up to you and your situation. If you take out a debt consolidation loan, pay off your debt, and develop a reasonable budget, yes, the loan can help you. If you pay off the loan and promptly run up more bills, debt consolidation won’t help much.

One Last Option

If you are in a position of financial hardship and need credit card relief for amounts exceeding $10,000, another option is debt settlement. In debt settlement, you negotiate to lower the total amount owed and then pay off the lowered debts. If that sounds complicated, check out Pacific Debt.

We will work with your creditors to negotiate lower payments while you build up a cash reserve. We’ll then pay down each bill or settle each account using our proven system.

There are some drawbacks – you have to stop paying some bills to convince creditors that you have serious financial hardship and desperately need to settle. This will affect your credit score but chances are your score isn’t that great to begin with.

If debt settlement sounds like an option or you have questions, contact one of our debt specialists today. They will explain all your options and even refer you to trusted partners if your needs don’t fit our solution.

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