Are you currently dealing with many different types of debt? If so, you may be interested in a debt consolidation loan. However, if you have credit that is below average, which is usually a score of 670 or less, then you may wonder what type of loan options you have. The good news is, many lenders actually specialize in providing these loans to individuals with poor credit.
You can improve your odds of approval if you spend several months trying to pay down your debt and then looking for quality lenders. The goal is to find someone who will consider your recent efforts when deciding whether to give you a debt consolidation loan or not.
How To Qualify for a Debt Consolidation Loan
Each lender has unique requirements for a borrower who needs debt consolidation loans. However, you can count on each lender to look at your current FICO credit rating, your monthly or annual income, and your debt-to-income ratio to help figure out if you will have the ability to repay the loan you receive. In most cases, a credit score of 650 (minimum) is required to qualify. While this is true, some lenders offer debt consolidation loans for poor credit.
Tips to Acquire a Debt Consolidation Loan with Poor Credit
If you are struggling with your debt and believe that a debt consolidation loan will help, you need to keep in mind that you will likely have to have a credit rating in the mid-600s.
Other factors considered by a lender include a history of on-time payments and sufficient income to repay the loan. Keep in mind, though, that every lender will have requirements that are specific to their loans. While this is true, there are a few tips you can use to increase your likelihood of getting a debt consolidation loan with less than perfect credit.
Monitor Your Credit Rating
Lenders will base a loan decision on the current condition of your credit. Usually, the lower the credit rating you have, the higher interest rates a lender will offer you. If you want to qualify for a debt consolidation loan, you must meet the lender’s minimum requirement. Usually, this will be a credit rating in the mid-600 range; however, some lenders will accept a score that is as low as 580.
Several banks are now providing free tools that let you check or monitor your credit score. After you know what this is, you can find lenders who will be willing to work with your situation. Keep in mind that there are lenders who specifically work with people who have poor credit. Be sure to find these service providers to help you secure the loan you need.
Consider Taking Out a Secured Loan
Most debt consolidations will be unsecured. This means no collateral is required. However, if you find it difficult to be approved for an unsecured loan or if the interest rate is just too high, then you should consider the secured option.
With a secured loan, you must have some type of collateral. This includes assets like your car, property, home, or something of value. In most cases, and with most lenders, the collateral you offer has to be enough to cover the amount of the loan in case you default.
Securing Your Financial Future with a Debt Consolidation Loan
As you can see, there are many things to consider when trying to acquire a debt consolidation loan with poor credit. The most important thing to consider in this instance is whether or not the loan will be of benefit.
One of the key advantages of consolidation loans is they typically come at a lower rate of interest than the loans you’re consolidating. If your interest rate will actually go up, you might want to seek an alternative method of managing your debt.