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How to Get a Debt Consolidation Loans When You Have Bad Credit

If you have a bad credit score is lower than 580 managing your finances through debt consolidation could be difficult to get loans. However, suppose you have “fair” or higher credit scores and are accepted for the consolidating loan.

In that case, this could be a simple option to cut down on your monthly installments, cut down on the amount of creditors you have to pay, and reduce the time needed in paying off debt.

The debt consolidation process consists of obtaining a new credit to settle high-interest debt to reduce the monthly payment and save money with time. Most people take out personal credit cards, loans with low-interest balance transfers, or debt management programs to reduce their debt.

Consolidating Debt Using Poor or Average Credit : Loans

The FICO Score ranges from 300 to 850 is the most widely-used credit scoring model used by lenders to evaluate the creditworthiness of a borrower. It has many levels. 

Scores above 670 are considered excellent, outstanding, excellent, or very good to be exceptional, depending upon the. 

The term “fair” score is between 580-669, and any score less than 579 is deemed “poor.” The credit score you have is essential to determine your options; however, there are options to reduce your debt even with a poor score.

Consolidation of Debt with the Personal Loan

Although there are options for debt consolidation offered to people who have “poor” scores, they typically have higher interest rates that are more than the rates for your existing loans.

An option is to check out online lenders such as Upstart, a Green Day Online personal loans partner. Upstart Partners alternative information besides credit scores and reports to determine if the applicant is eligible for the loan. Things like employment background, income, and education determine if an applicant qualifies for a loan at a lower interest rate.

Upstart can provide loans of up to $50,000, which could be used to pay credit card debt and consolidate other forms of debt. Upstart offers a simple application process, and being prequalified will not impact your credit scores.

LendingPoint

LendingPoint will provide loans to applicants with credit scores within that “fair” (or “good” range. The loan amount could range between $2,000 and $25,000. LendingPoint lets you check the interest rate before applying and won’t affect your credit score because of doing this. 

Alongside an assessment of credit scores, LendingPoint also considers factors like your work experience and income when deciding the terms of your loan.

SoFi

If you have a credit score that is within the excellent to the exceptional range, SoFi can provide loans of up to $100,000 with no origination or application fees. SoFi is a perfect choice for those who require a substantial loan and are willing to take a couple of days to deposit the funds.

What are the benefits of the debt consolidation loan?

One of the primary benefits of consolidating debt is the elimination of paying several lenders each month. If you consolidate all of your debts into one loan, you will only need to pay the new lender. 

Making one payment isn’t just more convenient, but it could also help you avoid dealing with payment delays and missed payments–which could happen when you are juggling several different monthly payments.

The history of your payments is one of the most significant aspects in calculating your credit score, accounting for 35 percent from your FICO Score–and it is crucial to make sure you don’t pay every loan payment past the due date. 

In late payments, it is possible to do so if a person has multiple loans each month and isn’t using autopay. Another benefit of using a consolidating loan for debt is that it reduces the interest rate you pay on the outstanding debt. 

Most people use the debt consolidation loan to pay off high-interest debts like credit card debt. These loans can have rates of interest that range from 18 to 25 percent.

Most of the time, it is the case that a credit card with a debt consolidation feature will have significantly lower interest rates according to your creditworthiness, saving the interest cost throughout the loan.

Imagine you had $5,000 of debt from a credit card, with an APR of approximately 25 percent. Over 36 months, your monthly installment for the debt would be around $240, and you’d be paying a total of $2,500 total interest. 

If you decide to consolidate the debt into a new loan, with an APR average of 17 percent for thirty-six months, the amount of interest you pay would be around $1,700, and your monthly payments will be reduced to $200. 

In this case, the lower the interest rate on the new loan, the less you’ll be paying for interest with time.

What Do I Need to be a Good Candidate for a Debt Consolidation Credit

Based on your credit score depending on your credit score, getting an unsecured debt consolidation loan may not be the best option. If you have a “poor” credit rating, it might be difficult to qualify for a loan to consolidate debt. 

The lenders often view people with “poor” credit scores as risky, and in turn, they may not grant a loan to someone who falls within the category.

Another possible issue when you apply for an installment loan for debt consolidation with a “poor” credit report is that interest rates of the new loan may at times be higher than your APR for your current debt. 

The lenders often consider your creditworthiness to determine the rate of interest you can expect. Therefore those who have a “poor” or “fair” score on their credit need to be cautious about taking on loans that come with more expensive rates.

Optional Loan Consolidation for Military Personnel

Military personnel can often have a harder time obtaining new credit from traditional lenders. Military personnel typically have less of a credit score when they are away for long periods from home without having to borrow money or use lines of revolving credit.

At the end there are special private lenders who cater to only military personnel. With these lenders, members of the military can apply for auto loans, mortgages, and even personal loans that could be used to consolidate debt.

A personal loan from the military lender is an alternative for military personnel looking to consolidate debt. The military lenders will look at those with lower scores, but they might still consider those with a seriously compromised credit score as at risk.

Prosper

Prosper partners with military personnel and the military to offer fixed-rate loans without the need for the borrower to go to the bank’s physical location. Prosper can provide unsecured loans that can reach $40,000 for people with good to excellent credit scores.

Alternatives to Debt Consolidation

While consolidating your debt could appear like the ideal method to reduce your monthly installments or reduce the stress of paying multiple bills every month. For some, other strategies for managing debt could be better.

  • Management Plans for Debt Management Plans

If you are thinking of applying for a loan, another option is implementing a debt management program to reduce your monthly debt repayments. If you consider a plan such as this, you’ll need to locate a credit professional and collaborate to develop and follow the repayment plan. When you and your credit counselor have agreed on a project that they can stick to, they’ll usually try to bargain with your creditors to obtain lower monthly payments and even an interest rate that is lower.

In this case, when the counselor has concluded negotiations with you, you’ll make direct payments to their company every month. They will take care of all your debt repayments for you.

A debt management program could be an ideal option for those with “poor” scores on their credit reports which might not be accepted for a loan to consolidate debt.

  • Credit Card Use

Responsible credit cards will help ensure that you don’t pile up excessive amounts of debt and become behind in payments. Being aware of what you can do to pay off your credit card bills can be very beneficial and could save cash over time.

  • The creation of a budget

The process of creating the budget and keeping track of your expenses is a crucial measure of knowing the amount you have available to pay for debt every month. When you have a budget set up, you’ll be able to allocate the appropriate amount for your debt repayments and towards your target of paying your debts off.

  • Bankruptcy

If you’re overwhelmed by debt and cannot think to pay the debt, bankruptcy could provide relief when you file for bankruptcy, the information. However, it will be on your credit report for seven to ten years, which could impact your ability to get another loan in the future.

If you think that debt consolidation could be beneficial, however, you’re not sure about your credit score, Green Day Online’s tool will assist you in finding a customized loan that is based on your FICO (r) Score.

Do you want to boost your credit rating instantly?

Green Day Online assists by providing credit towards the telephone and utility bills that you already pay. Up until now, these payments didn’t have a positive impact on your score.

This service is free and will improve your credit score quickly through your excellent credit record. It is also a perfect option for people with weak or difficult credit histories. 

Other services like credit repair can cost up to thousands of dollars and aid in removing inaccurate information about your credit history.

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