Debt consolidation loans is one method in which consumers with multiple debts can begin to repay their balances. With one of these loans, all debts are rolled into one account, allowing borrowers to make just a single payment per month before the balance pays off.
This simplifies the budgeting and repayment process and, oftentimes, can even lower the costs of borrowing the money entirely.
But debt consolidation reduction loans often require high credit ratings. For consumers who don•t fall into this category, read on.
How to obtain a debt consolidation loan with bad credit
According to Howard Dvorkin, CPA, and chairman at Debt.com, consumers will typically require a FICO score of at least 700 to qualify for an affordable debt consolidation loan. Borrowers with scores under this threshold aren•t without options, though.
“For those wanting to get a loan consolidation with poor credit, financing cosigner can help them consolidate without an issue,” Dvorkin said. “However, consumers with bad credit should be extra careful when looking for financing because predatory lenders usually give loan to borrowers with poor credit."
Shopping around for lenders is critical for all borrowers • but specially those with low credit scores. Use an online marketplace like PayPasser to make sure you•re getting the best rate and lender for your needs.
How to improve your credit score
Fortunately, credit scores will always be in flux, so consumers with low credit ratings can improve theirs before you apply for a financial loan.
There are some ways to do that, including:
- Reducing the money you owe and credit card balances
- Paying your debts on time, every time
- Correcting errors in your credit report
- Asking for any credit line increase
- Getting added being an authorized user on the high-credit person's account
- Avoiding new loans and credit cards
- Keeping long-standing accounts open (even when repaid)
With a debt consolidation loan, you could potentially save on interest, which would both lower the total amount that you simply end up paying over time and assist you to pay down your debt faster. To obtain a sense of what personalized loan choices are open to you, visit PayPasser to check rates and lenders.
Amid the COVID-19 pandemic, the 3 major credit bureaus are offering free weekly credit reports to any or all Americans (through April 2022). Consumers seeking to enhance their scores should begin using these reports to watch their progress.
Other options
Debt consolidation loans aren•t your best option for consumers dealing with lots of debt. Balance transfer cards is yet another strategy to consider.
Balance transfer cards allow borrowers to transfer their debts to 1 single charge card • often one having a low- or zero-interest promotional period. If the borrower can pay these off for the reason that period of time, it can mean significant savings in the long run.
If you're looking to eliminate debt quickly, an account balance transfer credit card might be just what you'll need. Consider using a web-based marketplace like PayPasser to compare a few of the top balance transfer cards side by side and select the best one for you.
Types of debt to consolidate with a personal loan
Many consumers use debt consolidation personal loans to deal with high charge card balances, but according to Dvorkin, these aren•t the only choices for debt consolidation.
“Most people think that debt consolidation reduction loans are only able to take care of credit card debt, but consumers can consolidate debt from unpaid medical bills, collection accounts, and payday loans,” Dvorkin said. “There is also consolidation for several types of loans for example federal student loans, private student loans, and auto loans.”
If you would like to obtain a sense of what debt consolidation loan options are open to you, visit PayPasser to compare rates and lenders.
Pros and cons of consolidating debt having a personal loan
Consolidating one•s debts might have some significant benefits.
Pros
- It streamlines repayment: This means just one payment comes due per month, making budgeting and money management easier.
- Lower payments along with a reduced rate of interest: For individuals with good credit scores, this could be another advantage. “If someone has trouble paying the minimum charge card statements, and they've up to $25,000 in credit card debt along with a decent credit rating, a loan consolidation can lower their monthly obligations, reduce their rate of interest and enable them to get out of debt faster,” Dvorkin said. “Debt consolidation is preferable to debt settlement, and it can help maintain a good credit score if done right.”
To make the most of these benefits, head to PayPasser to apply for a debt consolidation loan today.
Cons
On the down-side, debt consolidation loans can also be risky • especially to those who have a bad credit score habits.
- Potentially worsen your financial hardship: Failing to make payments on the loan or, even worse, using the loans for other purchases (not only paying down those debts) can get you in more financial trouble.
The bottom line
Sky-high debts aren•t insurmountable. Thanks to debt consolidation loans and balance transfer cards, there are methods out • despite a bad credit score.
For consumers that do opt for a loan consolidation, looking around is key (PayPasser can help), out of the box using a detailed loan calculator to ensure those payments will be affordable. Talking to a skilled loan officer or financial advisor is also wise.