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Is It Possible To Get Debt Consolidation Loan With Bad Credit?


1 week ago

The debtors down with bad credit are often in a dilemma whether or not they are eligible for a debt consolidation loan with bad credit. But the truth is finding a debt consolidation loan with bad credit might be challenging, but not impossible.

Good credit and Bad credit

To start with, one should be clear about bad credit. There are 2 firms which offer credit scores- one is FICO and another is VantageScore. Now, both companies carry a 300-850 range. The higher your credit score is, the better the situation would be for you and your lender since good credit score assures lower risk for the latter. So, 850 stands as the best score, while 300 appears as the lowest one. But then again, there is no hardbound rule or specified cutoff regarding the good or bad score. The parameter of good and bad score varies from one lender to another. However, the most accepted cutoff for a “prime” (good) loan is a minimum of 620. Anything between 580 to 619 usually refers to as “bad score”. Now, bad score is “near prime” which indicates that it’s closer to fair or sufficient and your lender might not be too harsh here as he would be with a “very bad score”- which is something below 580 and is termed as “definitely subprime”.

You can’t usually expect from banks

If you have a bad credit, you cannot expect a debt consolidation help from banks, as these financial institutions are usually very strict regarding a

great credit rating.

Debt consolidation companies

Debt consolidation companies would be helpful here. Yes, they too value good credit scores, but also don’t shut the door before those with poor credit. The only issue is that you would have to bear higher interest rates than what you would have to bear if you had a good score.

You can go for a secured loan

You can opt for a secured debt consolidation loan and avoid too high interest rates even with a bad credit- provided you are ready to state your home as collateral. When you attach your home as collateral, the lenders deem you as a relatively secured prospect as they will have the liberty to take up your home in case you fail to pay.

What if you can’t offer a collateral?

If you cannot offer a collateral, you will have to opt for an unsecured debt consolidation loan and sign up for spiked interest rates given that you can’t provide any security for your lender here. But then again, you can manage reasonable terms with unsecured loans even with bad credit. This is only possible if you go for a non profit company rather than a for-profit firm. The non-profit organizations operate on funding and they are not profit-centric. They are mostly concerned about the customer’s interests and hence, would be sympathetic to your situation. Thus, you can expect a somewhat reduced interest rate here compared to those offered by for-profit lenders, regardless of the poor status of your credit report.

Category: Credit

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