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Can I Still Get A Consolidation Loan With Bad Credit?

Debt consolidation loans are great for those who are looking to lower the amount that they pay on their debt each month. It is also beneficial because you can make one payment to cover all of your bills. This makes it easy and convenient to stay on top of your bills. However, is it possible to get a debt consolidation loan if you have bad credit? Take heart, it just may be.

Do You Own Your Home?

If you own your home, it may be possible to get a debt consolidation loan with a poor or average credit score. A lender will take into account your current income and recent credit history to determine if you have the ability to make payments in a timely manner. Owning your home is a plus because it can be used as collateral. While you may pay a higher interest rate for the loan because of your bad credit, it should still be less than what you would pay for a personal loan or on a credit card.

Could You Qualify for a Credit Card?

Many credit cards offer 0 percent interest on cards for people of all credit levels. While you may pay an annual fee for the card, you may still be offered the low interest rate for up to 18 months. If you want to transfer your balances from other cards, you may be able to do that as well with no interest.

Many “Bad Credit” Lenders Offer Consolidation Loans

If you are someone seeking debt consolidation with bad credit, you may be able to get a consolidation loan from an institution that brands itself as a bad credit lender. However, the interest rate on such a loan may be higher than what you would pay for a home equity loan or credit card balance transfer. To lower the interest rate that you will pay, you may consider securing the loan with collateral, even if you don't have to. For example, you may put up your car or something of value if you don't own a home or don't have sufficient equity in your home.

A Margin Loan Could Be a Solution

Those who have a large net worth may take a margin loan to pay off their debt. A margin loan uses the value of a person's investment portfolio as collateral for the loan. However, this may be risky as your investments could lose value and you would owe your broker. Therefore, this may be a last resort for those who truly have nowhere else to turn to get a consolidation loan.

Consolidating your debt may be a great way to help you manage your finances. Using a home equity loan, personal loan, or a credit card balance transfer may be useful ways to accomplish this feat. Whether you secure the loan with collateral or not, be aware that your interest rate may be higher due to your lower credit score even if you have taken steps to repair your credit over the past several months. Fortunately, your credit will be boosted by your debt consolidation! Once you pay off that loan, your credit score will be in much better shape than it was when you started.

Last Updated: March 10, 2017