How To Get A Debt Consolidation Loans For Bad Credit
Each year, millions of Americans struggle with credit card debt. Sometimes, it can feel impossible to get ahead on your bills and begin to pull yourself up to a place of financial freedom.
A debt consolidation loan may be the best way for you to get a handle on your debt, and become financially independent once again. Today, we’ll cover what you need to know about how to get a debt consolidation loans for bad credit.
Related: Top 11: Best Debt Consolidation Loans Reviews
What Does Debt Consolidation Mean?
Debt consolidation is a process by which a borrower receives a loan for the amount of money they owe in bills to different creditors. Most commonly these creditors are entities like banks, credit card companies or hospitals.
The money a person owes to these creditors is subject to interest, which is often very high, making it difficult or impossible to get ahead on your bills.
A debt consolidation loan typically has a lower interest rate than credit cards, and by consolidating debt, you may be able to save money on interest charges, while streamlining your bills into one simple monthly payment.
What Are Unsecured Debt Consolidations and How Do They Work?
Debt consolidation loans come in two different forms, secured and unsecured.
An unsecured debt consolidation loan is a loan provided to a borrower where the borrower does not put up any sort of collateral to secure the loan.
The only thing binding the borrower to pay back the loan is the promissory note they signed at the time the loan was funded. With a secured loan, the borrower puts up something of value to secure the loan, such as their home or… car.
These loans have lower interest rates than an unsecured loan, but they also are more risky for the borrower, since failure to abide by the terms of the loan can result in your collateral being taken by the lender.
What You’ll Need to Get a Debt Consolidation Loan
Thanks to the internet, applying for a debt consolidation loan is a straightforward and simple process. To apply for most loans, all you’ll need is some basic information about yourself and your finances. Here’s what you’ll need to know to apply for a loan:
- Social security number
- Financial information (your annual income, plus any additional income you have)
- Names of your creditors and the amounts you owe
How to Apply for a Debt Consolidation Loan
1. Gather Your Info
Once you’ve gathered all the information you’ll need to have handy, the application process is about as easy as creating an account on Facebook or Instagram would be. Except for banks with physical locations, where a representative will walk you through each aspect of the process, almost all debt consolidation loans are handled completely online.
2. Choose a Lender to Apply With
There are tons of different lenders who specialize in debt consolidation loans. Some lenders are best for those with great credit, while others cater towards people with middle-of-the-road credit.
There are also lenders who work with people with poor or fair credit. We’ll cover some of the best options for borrowers with poor credit below.
3. Fill Out the Application(s)
Fill out the application on the lender’s website, and if you’re approved for a loan, they’ll show you the terms of the loan you were approved for. From there, it’s up to you to decide whether or not the terms of the loan are favorable for your situation.
Applying for a loan involves a soft credit check, and a soft credit check won’t affect your credit score. So, it’s common for borrowers to shop around, and check what kind of loan terms they’re able to get from several different lenders before deciding on the best option for their needs.
4. Evaluate Your Loan Offers
Once you’ve received terms from several different lenders, it can be helpful to make yourself a chart so you can compare each loan, apples to apples.
The most important terms you’ll want to compare are your interest rate, the length of the loan, your monthly payment, and how much you’ll pay in interest over the life of the loan.
This debt consolidation loan calculator makes it easy to crunch the numbers and decide which loan, if any, is a good fit for you.
5. Pick Your Best Option and Get Your Loan
Once you’ve decided which lender is offering you the most favorable terms, you’ll have to make the ultimate decision of whether or not debt consolidation is right for you.
If you decide that a debt consolidation loan is the best choice for you, sign the promissory note, and take the loan.Depending on the lender, you may have the funds for your loan available within a day or two.
Need Help With Credit Repair? Check Out These Service Reviews
- Lexington Law Firm Reviews (its a law firm that does credit repair as well)
- Ovation Credit Services (a Lending Tree company)
- CreditRepair.com Reviews
Where to Get Debt Consolidation Loans With Poor Credit
All this information on debt consolidation is great and all, but now you’re probably wondering how to get a debt consolidation loans for bad credit. There are many different lenders who cater to those with fair or poor credit scores. Here are some of the top-rated options.
One Main Financial
For those with poor credit, One Main Financial is one of the most favorable lenders you’ll find. While most lenders have minimum credit score requirements to apply, One Main does not.
The range of their interest rates is on the high side of the spectrum, with rates ranging from 16.05-35.99%. There’s also an origination fee of up to 6% when the loan is funded.
One Main also offers secured debt consolidation loans with lower interest rates which start at 9.99%.
One Main Financial is a good option for those who prefer a traditional banking experience because they have over 1,600 branches nationwide. In fact, prospective borrowers often have to visit one of their branches to receive a loan.
Upgrade is another viable option for those with less than stellar credit.
Unlike One Main Financial, a minimum credit score of 620 is required to apply for a loan. Assuming you meet their requirements, you may be rewarded with a more favorable interest rate, as their rates range from 6.99-35.97%. The origination fee for a loan is up to 5%.
Upgrade also provides their lenders with free financial tools that make it easy for borrowers to learn more about their finances, and establish positive habits so they can begin building a stronger debt-free future.
Marcus by Goldman Sachs
Marcus, the new personal loan branch of Goldman Sachs, one of the world’s most respected financial institutions, provides debt consolidation to a broad range of clients, many of whom have less than perfect credit histories.
The minimum score required to apply for a loan is only 580, which is promising news for prospective borrowers who have been turned away by other lenders due to their credit history.
Marcus’ rates range from 6.99-24.99%, which are considerably lower than the other two options we’ve discussed previously. Another thing that separates Marcus from other lenders is that they do not charge an origination fee for their loans.
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If you’ve had some issues in the past and you’re trying to get a handle on your finances, the question of how to get a debt consolidation loans for bad credit is of critical importance.
While a poor credit score does make it more challenging to secure a loan, you should still have several options to choose from.
Before deciding on a loan, pay special attention to the terms of the loan, and evaluate whether or not a debt consolidation loan is going to help you as you try to improve poor credit.
Have you had an experience with debt consolidation? How did it go? Be sure to sound off in the comments and share your thoughts!