Understanding Bad Credit Debt Consolidation Loans

It is almost impossible taking out loans with bad credit, especially if you have an unsteady income and a chequered repayment history. Financial predicaments tend to arise at the worst times. Maybe you took out a loan early in your career, confident that you’d flourish and meet the repayment schedule. The company might have wound down, or you may have been laid off. Whatever the case, being unable to meet your liabilities will affect your creditworthiness. So how does one access loans with not so good credit?

While the federal government provides loan funding that doesn’t really care about your credit history, most private lenders are extremely conservative when it comes to vetting and approving candidates for loans. With this in mind, it is important to know how to deal with bad debt before it affects your future any further.

One steady way of dealing with bad debt is to consolidate all your loans into one big loan and pay these smaller options faster, leaving you working on one big loan. If you are lucky, you may get reduced interest on these consolidated loans.

Wondering How to Consolidate Student Loans with Bad Credit?

loans with not so good credit

Think of a possible scenario. James has 5 loans with 5 different providers, all totaling 40, 000$. He has two student loans of 12000$ and 15000$ with APRs of 9 and 6% respectively, credit card debt of 7000$ and a personal loan of 6000$ with APRs of 20% and 14% respectively. If James starts falling back on his payments, then his creditworthiness is at risk. What if he could look for a better lender who could give him a loan to cover all the remaining principal plus interest and then combine that into a single loan with even lower interest and a longer payment period? This is the principle of debt consolidation.

Consolidation loans are great for people who have reached their limits in debt and cannot afford to suffer any more adverse effects on their credit. Some companies will only offer loans to such people if they can bring along a guarantor, and unless the cosigner is a close friend or relative, getting such people may be difficult to find. Some may also require that you put up a security, which leads to guaranteed debt consolidation loans for bad credit. You may put up a vehicle or a house as security for the consolidated loan although the company will always use the LTV or Forced Sale Value of the asset to compute the value of the loan they award you. Credit cards are the biggest culprits when it comes to creating bad debt because there is always a tendency to splurge and buy things on impulse. Credit cards carry very high interest rates, some reaching as high as 30% depending on what you buy, and all these require you to make monthly payments. A situation may arise where you are almost paying as much as you earn in debt yearly. It’s no wonder Americans are referred to as the most indebted people in the world.

Credit card loans for bad credit are easily available because the interest charged is high, although most of it is unsecured. It is easy to get caught in the debt trap if you have an affinity for credit cards. A common scenario is someone having more than 10 credit cards and all of them being declined.  Some companies provide easy loans with bad credit, although the interest on these is phenomenally high, and you may end up paying more with less time.

One may wonder how a student ends up with bad credit. The main culprit is always credit cards.

Credit card loans for bad credit

Bad Credit Consolidation Loans Help Struggling Students Clear Their Balances

Unsecured debt consolodation loans are common for credit cards, and there are providers who will do it except they may charge high interests. Security is always great for any lender, especially when dealing with someone who has a bad credit history. The most important thing is to spend time and look for lenders who will offer you a lower rate and who is willing to go the extra mile to help you reorganize your debt. There may also be fewer tax benefits with these companies. Some companies such as the Lending Club may require that you have a minimum credit score and will also offer a maximum term limit, which means you must be able to repay within the stipulated time. You need to evaluate whether the time allocation and the interest are worth it to take credit from these companies.

Other loans companies for bad credit include online lenders like PersonalLoans.Com, Avant, Runners-Up and a variety of other online lenders. You need to check what kind of debt you have and how fast you need to repay it. That way, you’ll find a company that won’t take advantage of your situation. There are also non-profit lenders although these cater to special interest groups. The internet is a good place to check where to get loans with bad credit.

Options for Refinancing Student Loans with Bad Credit

If you are a student and you’re wondering how to get loans with bad credit, exhaust all federal funding options first. Repayment can be deferred, and the interests are lower than all other types of credit.

Are debt consolidation loans worth it? If you are neck-deep in several debts, then it could be one of the best options available for you. Losing your creditworthiness could take months to fix and might even land you in trouble with the IRS and state tax services. Find a provider that understands your needs and can give you proper advice. Try to keep away from credit cards and balance your income and expenditure.