Can I Get a Debt Consolidation Loan With Bad Credit?
We all have needs in life. At some stage, you’ve probably found yourself saying: “I NEED a new car!” or “I NEED a holiday!” or “I NEED that pink Gucci handbag!” This is great and exciting and fun… Until the debts start to mount up. More debt means more repayments and more repayments means less financial control. Soon, the need for a holiday is a distant memory and instead, you’re having to spread yourself thin to afford the weekly groceries. As it gets harder and harder to keep up with payments coming from all over the place at different times, you start to miss payments. Consequently, your credit score will take a hit and you find yourself with a bad credit rating. In this instance, lenders won’t touch you with a barge pole. So, what can you do if you desperately need financial support but you have bad credit? You have 3 options:
- Wait 5 years for any defaults to clear from your credit file. Can’t wait that long?
- Clean your credit history with a credit repair company. Don’t have the funds available to pay for this?
- Get a debt consolidation loan with bad credit.
What is bad credit, and can I still get a debt consolidation loan?
A person is deemed to have ‘bad credit’ when they have a poor history of repaying debts. (Check your credit score)
The worse your credit history, the harder you will find it to borrow money, because lenders will be less willing to lend you money and will charge you higher interest rates.
However, people with bad credit histories can still make debt consolidation work by following this three-step process. First, find a lender willing to give you a bad credit debt consolidation loan (we offer them). Second, make sure the interest repayments on your new loan are less than the repayments on the loans being replaced. Third, instead of spending those savings, use them to repay the new loan.
But what is debt consolidation and how can it improve my score?
For many Australians, Debt Consolidation can be a fantastic way to kickstart your financial management plan. Yes; you may have outstanding debts across multiple credit cards, and you may have bad credit. But this should not stop you from taking control of your financial situation.
A Debt Consolidation loan ties all of your current debt into one, easy to manage package with one fixed interest rate (usually lower than you are currently paying). Not only does debt consolidation make paying your debts much easier, reducing the chance of missing payments; but it can also save you money! In addition to this, your credit score can actually be boosted (see recent blog) through debt consolidation. By consistently making timely repayments, you will demonstrate that you’ve become more credit-worthy, resulting in a boost to your credit score. Also, having all of your debts under one, can minimise credit applications, meaning another big thumbs up!
So, not only can a debt consolidation loan with bad credit help to provide you with the financial support you need, but it can also improve your bad credit score. Win-win, right? Here are some tips to consider when learning how to manage your finances.
Is debt consolidation with bad credit right for you?
What ideas do you have about consolidating debts? Do you consider it as a way of getting away with debts or as a tool to help you manage your finances wisely? If you think you can avoid debts and start new ones, then you got it all wrong. Debt consolidation does not erase debts. It simply rolls it into one manageable debt, with new terms and conditions, new monthly repayment schedule and a new payment amount.
The truth is that debt consolidation takes discipline to work. A borrower wears many hats—that of a debtor and a finance manager. Take a self-employed borrower, for example. He may be spending more than $3000 a month for his various loans in the past, but now he has to pay only $2800 a month. Still, he is a debtor who has to pay his dues. The only difference is that he is now paying less and with only one lender. It may seem that he just makes a living and paying his obligations, but he’s also responsible for his budget so he can meet his daily needs, the costs of running his business and managing his debts. He is his own finance manager and he is still ultimately responsible for the results of debt consolidation. In the end, his credit standing depends on his financial decisions.
How much money do I need to repay my debts?
Without the right amount of financing, you can’t afford to repay multiple debts with varying interest rates. If you have a limited income; it may seem practically impossible to make repayments. It is therefore important to establish how much money you will need to pay any current obligations. So how does one do this? It’s quite simple.
- First, you need to determine the total amount of debts you owe. How much money will it take to cover your credit card debts, consumer loans, utility bills, mortgage loan and so on? Make a list of every debt you have for the last 12 months. Some will be ongoing costs, such as gas, electricity, water and rent payments. Others will be one-time instalment loans, such as a short-term loan.
- After you’ve made a list, decide whether you can repay the debt without getting another loan. Is it possible or not? Are there loans such as money borrowed from a friend? Asses your current situation. Look at what subscriptions you are using. For example; do you really use Foxtel? Are you actually going to the gym? Cut out unnecessary expenses to help cover your repayments.
- Establish the type of loans that you have. Note your large loans. List your high-interest debts and check which ones are fixed or variable. A fixed loan means that the interest won’t change in the foreseeable future. A variable loan, on the other hand, indicates that the interest will fluctuate over time.
Consolidating your debt can provide you with many opportunities, even if you have bad credit. So, can I get a debt consolidation loan with bad credit? Yes, you can! If you are in a situation like that described in this blog, get in touch and let Debt Consolidation help you.