Debt consolidation mixes various debts into one mostly with a low-interest rate. It might assist you in paying your debts rapidly provided you are managing your process very wisely. Taking a debt consolidation loan with bad credit is indeed quite challenging but there exist some options. You have to consider those factors that will affect your borrowing cost like the rate of interest, duration of the loan along with the fees. Here are some of the important factors that you can consider for taking a debt consolidation loan with bad credit:
Find ways for enhancing your credit score: If you require a debt consolidation loan right away, skip to the next step. But when you have a debt consolidation bad credit UK, then delaying taking a loan, doing on-time payments, and decreasing the credit utilization ratio are some of the steps you must take to give a boost to your credit score. This could open up extra lending options.
- Shop around for the best lender: When you have a debt consolidation bad credit UK, the number of lenders to offer loans is limited. But that does not imply that you have no options. Check for the minimum credit score needs through some of the potential lenders. You can search for bad credit debt consolidation loans to know about the offerings that might be customized for you.
- Look out for predatory lenders: When you have bad credit, you become a target for lenders but that doesn’t mean that you must settle for the first consolidation loan that you come instead of the rate of interest that is being offered. Check for all important lender websites for fees that can give you a high rate of interest.
- Calculate: Use some debt consolidation calculation tool to check whether the loan will save you some money or not. Do not forget to take into consideration the interest rate of the new loan, origination fee along with other costs.
- It is crucial to apply for prequalification: For bad credit borrowers, it is important to apply for pre-qualification. It mainly involves a small inquiry on credit which implies your credit score will not be affected. When you have a bad credit, losing a single point from application submission and the resulting hard credit inquiry can have a bad impact on your chance of obtaining a loan.
- Take the cosigner into consideration: This is one of the best options for those burrowers having bad credit with very limited loan options. Your consigner is responsible for paying you back the debt consolidation loan when you are not able to make some payments. Based on the lender, this is your one chance of getting a loan.
- Fill a formal application: This involves a hard inquiry and can affect your credit score minimally. When your credit score is low, you should avoid the risks involved, therefore its the best decision to limit your formal application to your to plan choice. If you find out that you are required to apply for various lenders, ensure you do so within a 14 day window time so that it is considered as one inquiry on your whole credit report. Before you reach this stage, keep your documents ready which shows that you can repay easily like the tax returns and all pay returns. This is one of the best ways to prove your worthiness to the lender besides your bad score.
Now you must be wondering where you can get the debt consolidation loan when you are having bad credit?
With a huge number of lenders, it can become overwhelming for you to decide where to start. Have a look at some of the places to start with when you have a debt consolidation bad credit UK.
- Credit unions and local banks: The credit unions and the local bank will indeed look at your credit when you apply for some of the personal loans, like those other lenders. But these financial institutions might provide you with more leeway when your credit score is not in good shape. The institution might look beyond all your credit score and take into consideration the entire financial history, along with personal circumstances and the bond with the credit union.
- Online lenders: Some of the online lenders are also a good place to check for the debt consolidation loans when you have bad credit. It is because they are more likely to endorse you for bad credit loan than the old brick and mortar bank. With an online lender, you can easily compare the rates without affecting the credit score. Moreover, you can also apply rapidly and easily without much paperwork. While checking for online lenders for the potential debt consolidation loan, its crucial to know whether the company that you are taking into consideration is a direct lender or any third-party lender.
So, this is all about how to take a debt consolidation loan when you have bad credit. But make sure when you are opting for a debt consolidation loan you take some extra steps for your financial stability like making a budget, lessening your overspending, and looking out for some extra income opportunities.