When debts have grown to such a level that repayments are too much to handle, it is impossible to ignore the fact that something needs to be done. There are a few routes to consider, but amongst the most practical is consolidation. The good news is that getting a debt consolidation loan with bad credit is not such a major problem.
Admittedly, the temptation is to file for bankruptcy and get the debt monkey off their back, but the consequences of this option can be severe, with credit options all but wiped out for a period of at least 12 months. Consolidation is more proactive, and getting approval with poor credit scores is actually quite simple.
Why is this? Well, logically it would only be a bad credit borrower who would need to seek a debt consolidation loan anyway. Only after an extended period of struggling to make repayments, and missing them, would it be needed - and missed repayments cause credit scores to fall. But how can someone qualify for these loans?
Lenders offer consolidation as a normal financial product, so it is possible to get one in advance of any real financial problems. But for those applicants who are seeking a debt consolidation loan with bad credit, the task of qualifying for the loan itself is quite simple.
As with all other loans, affordability is the most important factor in securing approval. When assessing this, the lender will look at your existing debts and their repayment sums. When these are combined, the lender knows to what degree the total repayment sum needs to be lowered to make it affordable.
Getting approval with poor credit scores is simple because the credit scores have no bearing on the assessment. What matters is that the monthly repayments on the debt consolidation loan are within your budget. If the total repayment on 5 existing debts is $1,500, then a new sum of $750 should be affordable.
2. Seeking a Longer Term
In relation to affordability, the best way to ensure this is to seek a longer repayment term. This is because it directly affects the repayment sum. For example, when seeking a debt consolidation loan with bad credit, agreeing a 20-year term is set to ensure approval more than a 10-year term.
How is that the case? If the combined debt balances add up to $150,000, then repaying that debt over 10 years means monthly repayments of around $1,250. But if the same principal is repaid over 20 years, then the monthly repayment sum is $625. Obviously, the latter is much more affordable.
But while securing approval with poor credit scores is so much more likely, it is important to note that the amount of interest paid over the lifetime of the debt consolidation loan will be much higher. The key difference is that the financial pressure is alleviated.
3. Offer Security For Greater Sums
Whether an applicant is seeking a secured or unsecured debt consolidation loan with bad credit can be significant. As with every other kind of loan deal, the lender wants to be sure they will get their money back, and offering some kind of security helps in that cause.
When large debt sums need to be covered, collateral might be hard to find, but a cosigner would be ideal. A cosigner, of course, acts as a guarantor promising to make the debt repayments if the borrower is not able to make them.
Getting approval with poor credit scores might be straightforward, but approval of the debt consolidation loan is practically guaranteed when a cosigner is included.