Debt Consolidation Loans for Poor Credit

A debt consolidation loan is a type of loan designed to help reduce debt by combining multiple payments into one loan, which can be provided by a bank or other financial institution. The idea is that the person pays less interest and monthly payments compared to some smaller loans. The question is whether there are debt consolidation loans for poor credit.

A debt consolidation loan consolidates many debts from different credit accounts into a single payment. They are a good option if you struggle to pay your debts on time and have had trouble managing different payments in the past.

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All debt consolidation loans come with hefty fees that are usually charged on top of the interest rate on your loan. This is one of the drawbacks when it comes to debt consolidation loans.

Debt Consolidation Loans for Bad Credit

In the simplest sense, debt consolidation is the transfer of several high-interest credit accounts into one account with a lower interest rate. Typical examples include rolling three or four credit card accounts into a single personal loan, with a lower interest rate and for a fixed period.

The main benefit of consolidation is that you will have lower monthly payments and only one or two bills rather than several. For consumers with bad credit, consolidation can improve their credit score by reducing the number of open accounts or open credit balances.

But behind the benefits of debt consolidation, what if the credit has a bad rating?

But getting a debt consolidation loan with bad credit is difficult (FICO considers scores below 580 to be "bad," or bad). Lenders may be reluctant to approve your application, and those who approve you will most likely charge high-interest rates or fees—making it difficult to disclose.

If you have bad credit, it's a good idea to explore your options. But it's important to know that the options may be limited and expensive, and predatory lenders may target borrowers in your situation. In some cases, you may be better off paying off existing debt without applying for a new loan.

Some of the most popular online lenders to identify potential sources for debt consolidation loans. These lenders can provide loans to borrowers with lower credit scores, but that doesn't mean they approve every application. To qualify for a loan, you usually need a steady income or other factors that can offset items in your credit history.

1. LendingClub

LendingClub is a pioneer in online lending, and you can be considered for approval with any credit score; LendingClub does not disclose minimum scores. You can also apply for a loan with a co-borrower, which can increase your chances of being approved.

2. OneMain Financial

With a relatively small loan amount, start-up costs, and rather high-interest rates, OneMain Financial may be one of the most realistic options for borrowers with bad credit. If you're having trouble getting approval, you can also pledge collateral to increase your chances. That's a risky move—you might lose the item you promised if you miss the payment—but if you have no other choice, it makes sense.

If you decide to pledge a warranty like your car, consider the risks carefully. Will you be able to start working and earn income if you lose your vehicle? What about transportation and care of family members?

OneMain Financial has a physical branch, and you may be required to go to the branch to complete the application process. However, if you do not live near a branch, you can work with OneMain Financial entirely online.

Before you borrow, review any origination fees—they can be as high as 10% in some states. If you also pay high interest, borrowing can be very expensive.

3. Avant

Avant offers debt consolidation loans online with no minimum credit score requirement, but borrowers with scores above 600 have the highest approval rates. Avant evaluates factors such as your income and payment history when making approval decisions.

With bad credit, you will most likely pay the highest rates on Avant. Plus, fixed administrative costs add to the total cost of your loan. If it helps you get approval and save money overall, it may be worth it, but origination fees make the most sense when you can recoup those costs over time.

That little information about "debt consolidation loans for poor credit" is useful for you.

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