Even with a low credit score, you still have options when it comes to debt consolidation loans. A low credit score doesn’t have to mean the end of your debt relief options. Read on for a more in-depth look at what factors play into a low credit score and what options you still have when it comes to debt consolidation loans.
Causes of A Low Credit Score
There are many things that can contribute to a low credit score. Examining the causes may help you to start working on raising your credit score.
Late payments lower your credit score. When you get into credit trouble, you start to make your payments late. This circular pattern works to devalue your credit rating considerably.
Another problem you run into with late payments is late fees. These are added to your credit balance and increase your overall debt. Interest is also added to late payments, which makes the situation worse.
Late payments can quickly become missed payments, and that will begin to cause more credit issues. Missing payments is much worse than making payments late. A problem that consumers run into is that they believe they can get caught up the next month. When next month rolls around, two payments are late and there is no relief in sight.
Finding A Debt Consolidation Loan
The important thing to remember is that you do have options for debt consolidation loans for bad credit. You should explore all of your consolidation options to find the best one. For a more in-depth look at these options, take a look at our video all about debt consolidation loans with bad credit.
Higher Interest Rate
Getting approved for a debt consolidation loan when you have bad credit is difficult, but it is not impossible. One of your options is to accept a higher interest rate when you set up your consolidation account.
Before you accept a higher interest rate, you need to make sure that the consolidation loan is actually helping your situation. Add up all of your account payments and see how much they are costing you each month. If the consolidation loan payment is the same or more than your current payments, then the loan is not going to help you.
A second option to get approved for a loan is to use a secured loan. This is a loan that is backed up by your own personal property, which is more commonly referred to as collateral.
The interest rate on a secured loan can be negotiated, and it is possible to get a good interest rate on this kind of consolidation program. The collateral becomes the hurdle that many people cannot get over.
If you need a secured loan for $20,000 to consolidate your debt, then you need $20,000 worth of possessions that you own outright to secure the loan. Most borrowers will also require proof of ownership and proof that the item is paid in full. This can be difficult if you are already dealing with high levels of debt.
Whether you have good credit or bad credit, your debt consolidation loan term will be anywhere from seven to 10 years. That is seven to 10 years of interest accruing on debt that you have already held for years.
Consider Settlement Instead of a Consolidation Loan
A debt settlement company will negotiate with your creditors on your behalf to actively reduce your debt. Much like a consolidation loan, it has the same single payment convenience and quicker payoff schedule. But it also has several benefits that debt consolidation loans do not offer.
No Credit Check
You do not need good credit to qualify for a settlement arrangement. You can have very low credit and still qualify for a settlement agreement.
Reduces Your Entire Debt
Debt settlement lowers your balances owed by up to 50 percent, and then combines your accounts without using a loan.
The typical debt settlement arrangement takes 24 to 48 months to complete. Since the debt negotiation expert has often lowered your monthly payments considerably, you can apply that extra money towards your account and pay it off even faster.
Debt settlement gives you the convenience of a single monthly payment, but it eliminates all of the baggage that comes with a debt consolidation loan.
Our certified debt specialists are ready to help you plan your path to financial freedom and get on the path to becoming debt-free. It is easier than you think when you put your trust in the hands of an experienced debt relief company.
Call us today, and let us get you started on your own settlement program that will lower your monthly obligations and allow you to pay off your debt fast.