Take control of your finances and consolidate your debt, even if you have bad credit.
Debt consolidation is one way to manage repayments and reduce debt if you have more than one account you're paying interest on. By moving all your separate balances into the one account you can start reducing your debt by paying one monthly repayment instead of several. While many lenders require you to have a good credit history to take out one of these loans, there are lenders out there who will approve debt consolidation loans for those with bad credit.
What is a bad credit debt consolidation loan?
Debt consolidation involves bringing separate debt balances together into the one loan. You can generally consolidate personal loan, car loan or credit card debt. The lender may repay the debt on your behalf or you may be required to use your debt consolidation loan funds to pay out your existing loans and close the accounts.
How can I get a debt consolidation loan with bad credit?
Those with bad credit have a few options to consolidate their debt:
- Apply for an unsecured personal loan with a specialist lender. Some lenders offer large, unsecured personal loans to people with bad credit. Interest rates are higher than with standard personal loans but you may still be able to reduce what you're currently paying.
- Consider a Part 9 Debt Agreement. Debt agreements, which are a form of bankruptcy, are an option for people with large debts they are unable to repay. The financier will negotiate with lenders on your behalf and your debts won't accrue any more interest. Keep in mind this will be listed on your credit file for five years from the date you enter into the agreement.
What are the benefits of consolidating your debt?
There are various advantages to consolidating your debt, including:
- Easy to manage repayments. By consolidating your debts you can better manage your repayments, as you will only have to worry about one repayment as opposed to several.
- Reduce interest. By consolidating your debt you might be able to reduce the interest you’re paying, because the debt consolidation loan may have a lower rate than some of your existing accounts.
- Save money. Most loans and credit cards come with fees, and so by consolidating your debts into one loan you may save money from not paying separate fees.
- Get in a better financial position. By consolidating your debts and having more control over your repayments you can help get yourself into a better financial position.
How to make bad credit debt consolidation loans work for you
Not everyone who takes out one of these loans improves their financial situation. It's important to go about these loans the right way and make sure you don't make your debt even worse. Here are some ways to make these loans work for you:
- Lower your interest. One of the main points of these loans is to take advantage of an overall lower rate of interest across your loans. Make sure you do your calculations and work out if you're actually saving money on your new loan's interest rate.
- Sorting out your budget. Before you take on a new loan it's important to budget for the repayments. You'll notice a significant change in your finances as you'll be paying for one loan rather than several, so it will take some adjusting.
- Comparing your loan options. To make sure you're getting the best deal, compare your loan options before you apply. This will help ensure you get the lowest rate and fees available to you.
- Seeking advice. If you're struggling to consolidate your debts or are wondering how best to manage your repayments, you can seek financial advice to help improve your financial situation. This will help ensure you repay your debts and improve your credit situation.
How to compare bad credit debt consolidation loans
Like any debt or loan solution, it’s important to compare your options to find the best option for you. Here are some things to keep in mind when comparing bad credit debt consolidation loans:
- The lender needs to be reputable. Unfortunately, there are disreputable lenders who prey on those with bad credit, and may promise loans but then charge high rates and fees. Before you apply for a loan with a lender you should take a look at their website and see how easy it is to locate information, see if they are easily contactable, and even read some third-party customer reviews online.
- Fees are expected, but they shouldn’t be excessive. One way to find out how fair the fee structure is to compare your options online and see what other lenders are charging. Some fees you might expect to pay include loan establishment fees, monthly account-keeping fees, additional repayment fees, and so on. Make sure you check fees you might have to pay for using certain features, as well, such as being charged for making additional repayments.
- Rates also need to be reasonable. The point of a debt consolidation loan is to save you money from reduced interest across your credit accounts, so if the rate charged is too high then you may not be saving much money. Again, compare your options to see what a reasonable interest rate is.
- Loan terms that are offered by the lender should meet your debt consolidating-needs. The terms will also affect how much your repayments will be and also how much interest you’re paying over the course of the loan.
- What you’re able to consolidate may also differ between lenders, so you might want to check this before you apply. Some lenders may allow you to consolidate any debts from your open accounts, but they may have limits. Other lenders may only allow you to consolidate credit card debt or only personal loan debt. Make sure you’ll be able to consolidate what you need to when you compare your options.
What to know about applying
While a debt consolidation loan is often a viable option to consider if you are looking to better manage your debt, the same solution will not work for everyone. Before you take out one of these loans you should work out how much money you’ll save on interest and fees, and don’t forget to add any break costs or early repayment fees for your existing loans. If you’re thinking about applying for a bad credit debt consolidation loan then you can first compare your options to find the right loan. Once you’ve found a loan to apply for you can click ‘Go to Site’ and be directed through to the lender’s website and fill out an online application form. After that, the debt consolidation process will depend on the lender.