For anyone with bad credit, nothing is more frustrating than trying to find a loan. What is even worse, is trying to find one with a decent interest rate. Debt consolidation loans With bad credit with low-interest rates are almost impossible to get these days. Not only do you have to overcome the fact that you have bad credit, but you also have an issue of being strapped by so much debt, you are already struggling to make payments on the loans you have.
Pros and Cons of Debt Consolidation Loans
A debt consolidation loan may seem like an attractive option, but it's important to weigh the pros and cons to determine if it's the right choice for your situation. Be sure to fully understand
what is debt consolidation and how it works before moving forward.
Pros:
Lower interest rate
By consolidating multiple high-interest debts into one loan, you may be able to secure a lower interest rate and reduce the total interest paid.
Single payment
Consolidating into one loan means only having to manage a single monthly payment versus multiple payments.
Fixed payment schedule
Debt consolidation loans have a fixed repayment schedule which makes budgeting easier.
Pay off debt faster
Getting a lower interest rate can help you pay off your debt more quickly.
Cons:
Loan approval with bad credit is difficult
Lenders are hesitant to approve borrowers with poor credit.
You may not get a lower rate
There's no guarantee you'll receive a lower interest rate with consolidation.
Consolidation loan fees
Most lenders charge origination fees for consolidation loans.
The temptation to accrue more debt
Some borrowers end up running their credit cards back up after consolidating.
Do Debt Consolidation Loans With Bad Credit Exist?
For all practical purposes, the answer is no. Consumers with bad credit and high debt are extremely unlikely to find a lender who will give money to an already struggling consumer. Lenders are not very keen on taking on risky loans and as is most often the case, the only people who can qualify for debt consolidation loans, are the ones with good credit and don’t actually need the loan in the first place.
However, there is good news for consumers unable to find low-interest rate loans to pay off their debts. Since the purpose of the debt consolidation loan was to get rid of high-interest rate debt, there are other options available that can provide for the same or possibly a better outcome.
As a consumer looking for a solution that is better than paying minimum payments at 25% interest for 25 years, you should also look into both a consumer credit counseling program as well as a debt settlement program.
With a credit counseling approach, a company will consolidate your credit card payments into 1 monthly payment and typically bring your average interest rate down to around 8 to 10% depending on your creditors. Then your monthly payment will be set at a level which will usually pay off your debt in full plus the interest over about a 5 year period.
While this is certainly a good solution for some consumers, many have found the monthly payments in this type of program to simply be too high for them to realistically afford.
At Pacific Debt, we offer debt settlement programs to consumers who qualify. With our debt settlement program, we can typically negotiate a reduced principle payoff amount and settle your outstanding debts for less than you currently owe. Pacific Debt was rated one of the best debt
settlement companies from Top Ten Reviews.
Some of the obvious advantages to our settlement program over a credit counseling approach is that you could be out of debt in just a few years instead of 5 and potentially settle with your creditors for less money than you owe right now.
Keep in mind that all consumers have unique situations and a debt settlement approach is not the right solution for everyone. If you find yourself in a situation where your high debt has made it impossible for you to get a bad credit debt consolidation loan, and the payments on a credit counseling program will put to much strain on your budget, contact the professionals at Pacific Debt for a debt reduction analysis. The call is free, and in fact, we don’t charge our clients a dime until we can successfully settle their debts with their creditors.
For more information check out:
What is debt consolidation and how does it work? - Fully understand the debt consolidation process.
How to get debt consolidation loans for bad credit - Tips for qualifying with poor credit.
Credit repair tips - Take steps to improve your credit.
Debt settlement program details - Learn about debt settlement as an alternative.
FAQs
Conclusion
Debt consolidation can be a viable solution for simplifying finances and paying off debt more quickly. However, qualifying for a beneficial loan with bad credit can be a challenge. Be sure to weigh the pros, cons, and alternatives before pursuing debt consolidation.
Improving your credit score over time can open up better rates and loan options down the road. There are other debt payoff methods like balance transfer cards, credit counseling, debt management plans, and debt settlement that may be better suited depending on your individual circumstances.
Debt consolidation is just one potential strategy on the path to becoming debt-free. The right approach depends on your needs. With diligence and smart financial planning, you can overcome debt.
If you are struggling with overwhelming debt and want to explore your debt relief options, Pacific Debt Relief offers a
free consultation to assess your financial situation. Our debt specialists can provide objective guidance to help find the right debt relief solution.
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