When you’re overwhelmed with debt, a debt consolidation loan can help reduce your monthly payments and save you money in the long run. But it’s important to understand the risks involved before taking out a new loan.
Debt consolidation loan for bad credit are available from many lenders, including credit unions, online lenders and banks. The first step is to check your Experian credit report and FICO score for free before applying. You can also add a cosigner to your application to improve your chances of approval. If you’re approved for a debt consolidation loan, you can use the funds to pay off multiple outstanding balances. However, if you’re using the loan to pay off high-interest debt, it’s important to make your payments on time to avoid triggering more expensive interest charges.
Turning the Tide: How a Debt Consolidation Loan Can Help Overcome Bad Credit
Generally, you’ll need a minimum credit score of around 660 to qualify for a debt consolidation loan with an affordable rate. Credit unions can be a good option for people with bad credit because they typically offer lower rates than conventional lenders. Online lenders like SoFi, LightStream, and Lending Club are also willing to work with borrowers with fair credit.
Keep in mind that debt consolidation loans typically require a hard inquiry on your credit, which may cause your credit score to temporarily drop. This is because the lender is pulling your credit to determine your eligibility for the loan. But a hard inquiry typically only impacts your credit score for one year.
