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Yes, you may be able to get a debt consolidation loan if you have bad credit. However, you may be limited in the types of loan you can apply for, and will probably get a higher rate than someone with good credit.
Debt consolidation is the method of combining multiple debts or loans into one. When you take out a debt consolidation loan, you use the funds to pay off your existing debts in full, and then continue to make payments on your new loan.
It’s often used to make your repayments easier to manage and in some cases, can even help you save money on interest payments. If you have bad credit, it can also help repair your credit score if used correctly.
While debt consolidation loans are a useful tool for people looking to manage their debt, they may not always be suitable for those with a poor credit rating. One of the major benefits of a debt consolidation loan is the ability to reduce the cost of your debt by finding a loan with a better interest rate, and therefore, lower repayments.
However, if you have bad credit, you may find your debt consolidation loan options are limited, and the loans you’re eligible for are even more expensive than your current loans. This can make a big difference when it comes to repaying your loan, so it’s important you understand how much your debt consolidation loan will end up costing before applying.
If you take out a loan with a higher rate than your existing loans or debts, you’ll actually end up paying more in interest, and if you then fail to make repayments, you could end up in more debt and do further damage to your credit score.
A debt consolidation loan can potentially improve or hurt your credit score, depending on the type of loan you get and how you manage it. While debt consolidation loans can help make your debt repayments easier, it could also hurt your credit score if used incorrectly.
From the perspective of credit reference agencies (CRAs) like Experian and Equifax, a debt consolidation loan is treated much like any other loan. This means you could end up damaging your credit score further if you do the following:
Of course, a debt consolidation loan can also improve your credit score. If you take out a debt consolidation loan that you then use to pay off your existing debt, and make sure you make all your repayments in full and on time, this will be recorded positively on your credit file.
There is no minimum credit score that you’ll need to get a debt consolidation loan, but if you have bad credit, you many find that the loans you’re offered are even more expensive than your existing loans, which means you’ll end up paying more over time.
Debt consolidation can have a positive or negative impact on your credit score. Here’s how to make sure you don’t damage your record when consolidating debt.
A secured loan can help you consolidate your existing debt by offering lower rates and more flexible loan terms.