How to Consolidate Debt with Bad Credit
Even if you can’t qualify for a debt consolidation loan, there’s another way to get most of the benefits it offers.
Debt consolidation is a relief option combines multiple debts into a single monthly payment at the lowest interest rate possible. In the right circumstances, it can help you save money and get out of debt faster. The most common way to consolidate is with a debt consolidation loan. However not everyone can qualify and, depending on your credit score, you may or may not benefit from a loan.
Thankfully, even if a debt consolidation loan isn’t the best choice for you, there are still other ways to consolidate. This guide helps you understand how to consolidate your debt when you have bad credit. If you have any questions or need help deciding if consolidation is right for you, call (844)-402-3073 for a free, no-obligation debt evaluation from a trained credit counsellor.
Step 1: Determine if you can qualify for a debt consolidation loan
A debt consolidation loan is generally the best option to consolidate if you can qualify at the right interest rate. So, the first step you should take is to see if you qualify. You do this by shopping around for a lender or financial institution that offers a loan that will fit your needs.
Just like you should with any other loan, make sure to check with a few lenders. This will help ensure that you get the right interest rate and term to fit your budget and goals.
Tip: Shopping online makes comparing loans easier
You can use online loan comparison websites to compare multiple loan offers at once. Simply enter some basic information, such as:
- what type of loan you’re looking for – “consolidation”
- your credit score
- where you live.
The comparison tool will show you a range of loans that you may qualify for and let those lenders know that you’re interested in learning more. This can save you time and help you find lenders willing to work with consumers who have less-than-perfect credit history.
If you can’t find a lender that will give you a loan, skip to Step 3.
Step 2: Compare costs to ensure a consolidation loan is beneficial
Just because you can get a loan, it doesn’t necessarily mean that it’s the right option to get out of debt. In order to be beneficial, it should:
- Be for an amount large enough to pay off all your existing debts
- Reduce the total interest charges you pay to get out of debt
- Offer a monthly payment that works for your budget
If you have unsecured debts of more than $50,000 and you only qualify for a $20,000 loan, then this option won’t work for you. If you qualify for the amount you need, but the interest rate is as high as your credit card interest rates, then it won’t save you any money – either in total or each month.
Tools like loan and credit card calculators can help you do this. You can use the loan calculator below to see the monthly payments and total interest charges that you’d pay with a consolidation loan. Then you can use the credit card calculator to compare that amount to what you’d pay to get out of debt without the loan.
Is credit consolidation the right choice for you?