If you’re looking at debt consolidation loans, chances are your credit isn’t as good as it could be. Does this mean you won’t qualify? Before you lose hope, know that there are many options available to those with bad credit to consolidate their debt and begin efforts to improve their financial health. It can take time and dedication to dig out from maxed-out credit cards, medical bills, student loans, and other mounting debt. Working toward a solution and committing to the process will, over time, help you reach your financial goals and improve your credit. Here are some things to consider when qualifying for debt consolidation loans:
Know Your Credit Rating
Do you know your credit score? Every year, you are able to check your credit history from the three major credit bureaus for free through the government website. While this offers valuable data to know if there are problems that would make your score drop, unfortunately, the credit history does not include your actual credit score. Each credit bureau, as well as FICO, calculates your score differently. One way to find out your score is to ask your credit card company. You can also purchase your score directly through FICO. Knowing where you stand will help you move forward with debt consolidation.
What Loan Options Are Available?
In general, even people with bad credit can qualify for loans. The difference is that you may be paying more in interest or fees than someone with stellar credit. If you have a home or other kind of “collateral,” it may be easier for you to get what is known as a secured loan. If you do not, many lenders will not want to work with you if your credit score is below 620. However, some lenders are able to help people with scores as low as 500. Connecting online with a representative of a company who works with many different lenders can help you determine what is available. Often, you can find out what you qualify for before the lender does a “hard inquiry” on your credit.
You’ll need to get paperwork together so you are prepared when you are ready to discuss your loan options. Gather together your documents that prove your income and tax payments over the last few years. Also, you may need to show a statement of all your creditors to present an accurate picture of your financial situation. Finally, do the math: If you are able to show your lender how you plan to improve your credit with a debt consolidation loan, your chances improve. But if you’re planning to spend the cash from the loan on a big vacation, the lender might think twice.
Make a Plan for Financial Health
Finally, your options for debt consolidation loans will increase if you’ve created a plan for getting out of debt. Spending three to six months prioritizing your payments will look good on your credit history. Creating and sticking to a budget will help lenders know you are serious. While the decision to give you a loan often comes down to the numbers, you’ll improve your chances if you show your dedication to paying back the loan on time according to the terms. It can take time to improve your credit history, but you can do it if you commit to it.